One of the most significant, yet they’re often misunderstood, expenses that homeowners face is property taxes. For both prospective and current homeowners, understanding what property taxes are and how they impact the affordability and quality of homeownership is crucial. REALTORS believe that current and prospective homeowners ought to be informed about property taxes – including, how they’re calculated and their effects on individual homeowners as well as the broader community.
Essentially, property taxes are taxes that homeowners pay on the value of their property, typically assessed annually by local governments. This tax is based on a property’s assessed value, which is calculated by local tax assessors who consider the property’s market value, its size, and other factors.
The money collected from property taxes goes towards funding various community services. This money may fund a range of projects and services including public schools, emergency services, infrastructure, and public parks and recreation facilities. Because property taxes are a primary revenue source for local governments, they play an essential role in funding the services that make communities safe, attractive, and livable.
As mentioned, property taxes are calculated based on the property’s assessed value. Property taxes are typically calculated by multiplying the assessed value of a property by the local tax rate, which varies by location. To calculate the amount, the local tax assessor would first evaluate the property’s market value based on factors like recent sales of similar homes in the area, property improvements, and location. After figuring out the value, the tax rate is applied to the equation. The tax rate (often called the “mill rate”) is determined by local governments and reflects the area’s budgetary needs. The rate may change over time as community funding needs rise or fall.Finally, homeowners receive an annual tax bill based on this calculation.
As one would expect, property taxes have a significant impact on the overall cost of owning a home. This affects everything from monthly expenses to long-term affordability.
Property taxes, often included in monthly mortgage payments, affect a home’s affordability by increasing monthly expenses. Higher taxes mean a larger share of income goes to taxes rather than equity, which can make homeownership challenging for first-time buyers or those with tight budgets.
Looking at the long-term, property taxes vary based on property values, local needs, and tax rates, which can shift over time. Rising property values often lead to higher tax bills, potentially affecting a homeowner’s financial stability, especially in thriving neighborhoods where values—and taxes—escalate.
Property taxes can also influence home values and buyer demand. High taxes might deter buyers in some areas, while lower taxes can boost demand and raise property values. Meanwhile, communities with well-funded public services may attract buyers seeking high-quality schools and amenities, even if tax rates are higher.
Thus, for homeowners, property taxes are a recurring expense which must be considered before purchasing a home. High property taxes can deter some buyers, but they can also attract others who value the quality of local schools, parks, and infrastructure supported by these funds. Ultimately, understanding property taxes is a critical part of making informed homeownership decisions. REALTORS® provide an essential service by helping clients assess the true cost of property ownership, including taxes, and by offering insights into how local property tax rates can impact both short-term affordability and long-term investment. With a clear understanding of property taxes and their impact on homeownership, buyers can choose communities that align with their financial plans, lifestyle needs, and long-term goals.
For more information about buying or selling a home, be sure to work with a REALTOR®, a member of the National Association of REALTORS®. Snohomish County Camano Association of REALTORS® is the voice for real estate in Snohomish County. If you have questions for The Expert about real estate email us at [email protected], or visit www.sccar.org for more information
