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Property taxes must be paid annually by anyone owning a home or a commercial property. Depending on the terms of your mortgage loan, property taxes are collected monthly by your lender and placed in escrow until the taxes are due
Ad Valorem Property Tax
A tax assessed based the value of a property.
The taxable value of a property.
The ratio of the home value determined by the assessor and the value as determined by the market.
One mill equals one-tenth of one cent or $1 for every $1000 of a property’s value.
An additional amount not related to the value of a property.
What are property taxes used for?
The revenue generated from property taxes funds the budgets of cities, municipalities, counties and school districts. The money is used to provide essential services such as public safety and protection (police and fire departments), maintain infrastructure (streets, roadways, park districts), and to help support local schools and public libraries. Depending on the taxing body, typically the county where the property is located, services such as trash removal and sewer maintenance may be funded by property taxes.
How are property taxes calculated?
First, your property’s value is determined by your local tax assessor’s office. This value is not necessarily the sale price you paid for your property. The assessed value is then multiplied by the local tax rate.
Assessed value of your property = $400,000
Local tax rate (also called mill rate) = 25
Annual tax bill = $400,000 x .25% = $1,000
How are property taxes paid?
Property taxes are typically assessed and due on an annual basis. It is common, however, for property taxes to be due on a monthly basis to your lender and paid with your monthly mortgage payment. This will depend on the terms of your loan. Your lender will then deposit your property tax payment into an escrow account. When the taxes are due to the county, your lender will draw on the funds in the escrow account to pay them on your behalf.
Why do lenders collect and escrow property taxes?
Lenders seek to protect the investment made in the property and will use escrow accounts to pay the borrower’s non-mortgage related ownership expenses such as association dues, homeowner’s insurance, and property taxes. This escrow account is funded by you, the homeowner. Depending on the terms of your loan, you may be required to make monthly payments directly to the lender to pay these expenses. This practice is especially helpful to new homeowners, as it acts as a kind of forced savings account to make sure you have the money available when the bills are due.
What is a property tax exemption?
In California, there are several primary programs implemented by the county assessors’ offices that make portions of your property exempt from taxes:
Main Residence / Homestead
The first $7,000 of the assessed value of your home is exempt from property taxes provided it is your primary/main residence.
Veterans & Disabled Veterans
If you are a veteran or a disabled veteran who served in a war or campaign, you may qualify for certain property tax exemptions. For more information on this program, visit the Veterans’ Exemption on the BOE’s website.
California Propositions 60 and 90 have provisions that allow seniors to save money on property taxes when they sell their current house and buy and move into a replacement home. For specific information, visit the Tax Assessor’s website in your county. For Riverside County, click here