How Are School Taxes Calculated?

School taxes could be an unwanted expense if not planned for.

School taxes are a necessary evil when it comes to owning a home or business. Homeowners have to deal with these taxes when paying their mortgage or living in their homes to help schools be built, managed and staffed. Considerations to make when determining school taxes include assessments and tax rates.


Property Assessment

The amount of a particular property's tax bill is determined by the taxable assessment and tax rates. The tax rate is derived by the amount taxable by the governing body on the assessed property. This assessment is usually determined by the county where the property is located. The assessment is based on property size, age, updates and additions less property tax exemptions. The tax rate is levied based on that assessment.


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Every parcel of property is assessed. Anything considered real property (property with a permanent structure on it) is available to be assessed. Examples of real property are houses, office buildings, shopping centers and gas stations. All real property is assessed, but not all is taxable. Religious and government owned property are exempt from paying school taxes. Veterans may be eligible for a partial exemption for their taxes. And the School Tax Relief (STAR) program is available to seniors who may meet income eligibility limits.


Market Value

A property assessor will estimate the market value of that particular property when put up against sales prices of neighborhood properties. A property may be assessed on the cost of labor and materials to replace the property. Once the market value is established, the final assessment will be completed by multiplying the market value with a uniform percentage of the value. This value is determined by the state and applied to all properties.


Tax Rate

The overall tax rate is determined by the municipality's budget. The municipality subtracts other revenues besides property taxes (ex. sales tax); what's left is the amount of the tax levy to that particular municipality.


Final Taxes

The tax rate is generally calculated by dividing the remaining revenue needed to balance budget with the total assessment of all properties in the municipality. For example, $2,000,000 left to be taxed to balance the budget would be put up against $40,000,000 of all taxable properties. This would result in $50 of taxes for every $1,000 valued. The $50 is the tax rate. So, based on this example, a homeowner that has a $100,000 assessed home would pay $5,000 in property taxes. The tax bill varies on the tax levy for the municipality's residents and the value of the property.