When you purchase a home, you quickly learn the various aspects regarding homeownership in Detroit. The legal, taxation, and general homeowner information can be overwhelming, especially for first-time homebuyers. Here, in an easy-to-understand format are a few important topics relating to property taxes.
What is property tax? Property taxes are assessed on real estate that is owned. This includes the home and the owned land where the home is located.
Who assesses property tax? Property taxes are assessed and collected by the local government where the property is located, typically at the city or county level.
Why does property tax exist? Because it’s the law! Property tax collected contributes to local and federal funding and is used to keep cities and the nation operating.
How is property tax calculated? The amount of property tax each individual pays depends upon the value of their home and land and the local tax rate. The local tax rates are determined by local governments using the “mill levy” and these rates can vary from one city to another. The mill levy is calculated by using the amount of revenue a taxing jurisdiction will need for the year ahead, then dividing that projected amount by the total value of the property within that area. Generally, property taxes are levied at a rate between .2% and 4% of the value of the home and land.
Where does the collected property tax go? Property tax collections are used to fund city services and important community institutions and features such as libraries, schools, community centers and parks. Property taxes are also used for general maintenance of city streets, streetlights, and city police and fire department funding.
Can property tax rates change? Yes, your property tax rate can change and there are several different factors that can affect property tax rate increases or decreases. Improvements or upgrades that you make to your home that increase the value of your home will cause your assessed property taxes to increase. The assessing government body can raise or decrease property tax rates depending on financial needs. If a government body is facing funding shortages, or if they need funds to finance new projects, then property taxes may be raised in response to that need. In the event a governing body is not experiencing fund shortages, they might decide to lower property tax rates.
Homeowners Find Help Managing Property Taxes
With homeownership comes responsibility, and dealing with property taxes doesn’t have to be a burden. E&Y Tax Agency can provide you with solutions when it comes to paying and managing your property taxes. Call us today at (248) 362-1313 with your questions or for a consultation with one of our tax preparation professionals.