Legal Definitions - Property tax

Property tax is a tax levied by local governments on the value of real estate or other owned property. It is an "ad valorem" tax, meaning its amount is determined as a percentage of the property's assessed value. This assessment typically involves an appraisal to determine the property's worth. Property taxes are a primary source of revenue for municipalities, counties, and school districts, funding essential local services like public schools, police and fire departments, and infrastructure maintenance.

This tax is imposed on the property owner and must be paid regardless of whether the property is actively used, occupied, or generating income. While the use or income potential might influence the property's assessed value, the obligation to pay the tax stems simply from ownership.

• Example 1: Residential Homeowner

  A family owns a house in a suburban neighborhood. The local county government assesses the value of their home and charges them an annual property tax based on that valuation. This tax contributes to funding the local public schools and maintaining neighborhood roads. Even if the family goes on an extended vacation and the house is empty for months, they are still obligated to pay the property tax because they own the home, illustrating that the tax is based on ownership, not use.

• Example 2: Commercial Business Owner

  A small business owns an office building in a city's downtown area. The city assesses the value of this commercial property, and the business pays property tax annually. This revenue helps fund city services like public transportation and sanitation. If a portion of the office building remains vacant for a period, the business still owes the full property tax based on the building's overall assessed value, not just the occupied parts, demonstrating that the tax is due regardless of whether the property generates income.

• Example 3: Undeveloped Land Owner

  An individual owns a plot of undeveloped land on the outskirts of town, planning to build on it in a few years. Even though the land is currently vacant, not generating any income, and not actively used, the local municipality assesses its market value. The owner must pay property tax on this assessed value each year. This tax helps support local infrastructure development and planning services in the area, highlighting that even unused property is subject to this tax based on its assessed value.