Property Taxes – Why Can They Go Up Even if Real Estate Prices Decline?
Property tax is called an ad valorum tax. This type of tax is based on the value of the good or service or residence. The amount of the tax is usually imposed on an annual basis and the property’s value may be reassessed over time (usually every year).
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Other types of taxes are excise taxes, like sales taxes, and income taxes, which many of us know as the federal and state withholding deductions on many people’s weekly wages. Property taxes, however, are counted as ad valorum taxes and are determined by the county in most states.
However, it is important to remember that the county regulators do not use an estimate of fair market value when evaluating a house for tax purposes. Moreover, even if the market value of a property may decline, the tax value may increase, or the tax may increase, resulting in one’s tax bill to increase even though there is a falling real estate market.