Is a School Tax a Real Estate Tax?

The Relationship Between School Taxes and Property Taxes

In many of the school districts, the school tax is a property tax based on the assessed value of your home or property. Though not the only way to fund a school system, school tax accounts for roughly half of all property tax revenue, according to the Lincoln Institute of Land Policy. So the more valuable your property is, the higher your school tax will be. Renters don’t get away without paying a school tax, either. Property taxes are one of the factors that a landlord must consider when setting rent amounts, so the higher the school tax is, the more likely the rent will be higher.

What are Real Estate Taxes?

Property taxes are real estate taxes. Under IRS rules, to be considered a real estate tax, the tax must be applied to the assessed value of the property, the assessment must be made uniformly throughout the community and the proceeds must be used for general community or governmental purposes. If you itemize your deductions on your income taxes, you can deduct the amount you pay in non-commercial property taxes on Form 1040 Schedule A.

Debate

While renters pay a hidden school tax in their rents, some property owners pay a hidden school tax in their property taxes. Not all school districts are funded with a direct school tax. Some states fund school districts from the state and local level with proceeds from the property taxes collected. In this case, the taxing authority, such as the county, decides how much will be given to the school board and then incorporates that revenue need into the calculation for the county property tax.

Non-Real Estate School Taxes

Some states have a school tax that is not a real estate tax but an income tax. You pay the school tax based on your income with some deductions and adjustments based on state law. You will need to file a tax form just as you would for a local taxing entity like a town. With this type of school tax, even renters will pay a direct school tax, and the wealthiest people in the school district will pay a higher amount whether or not they have children in the school system.