How to Select Property Insurance and Compute for Your Property Tax

Home insurance or business insurance is vital when you own a property. There are several ways you can be sure you have the right insurance that fits your …

Home insurance or business insurance is vital when you own a property. There are several ways you can be sure you have the right insurance that fits your needs. Unusual weather conditions may cause damage to your property or even make it unlivable for many months. Does your insurance cover the expense of living away from the property for a period of time while contractors repair it? You may face this as an investor or as a home owner.

Damages are paid by insurance policies in two different ways. Cheap insurance may not be the total answer. You may have signed up for a policy that covers actual cash value of the property. As an investor, that may mean the property has been depreciated and the insurance will not cover the actual loss. If you have a policy that specifies replacement value, then you will be fully covered in case of loss. This type of coverage will reimburse you for the total cost to replace the property. Every investor should read their policy carefully to be sure they are fully covered.

Property Tax

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This is an annual tax based on the value of both the land and the improvements on that land that are permanent. Counties hire people to set the value of each property. This is called an assessed value. No matter what you paid for a property, you must find out the assessed value before you can begin to compute and estimate your property tax bill.

All taxing authorities that govern the property in question will publish their millage rate for the next year after they have decided what it will be. A millage rate is the percent of tax for each taxing authority that the property owner will need to pay. A mill is the assessed value divided by 100. For example, if the property is assessed at $100,000, the millage rate will be applied to $1000. To continue the example, suppose the millage rate for a county is set at .534. The tax to be paid to the county will be $534.

If you wish to estimate your property tax, you must take these steps:

  • Either online or by a trip to the assessor’s office, find out the assessed value of both the land and the permanent improvements. If you question your assessed value hire either a private assessor or a property tax consultant who will be responsible for the appeal and its data. Many jurisdictions do not change the assessed value on a property every year.
  • Once you have the assessed value, find out what taxing jurisdictions and millage rates that apply to your property. You must be sure you have all the millage rates.
  • Now you are ready to estimate your property taxes. The computations you will need to make are now very simple.
    1. add multiple millage rates together = total millage rate
    2. subtract any deductions allowed from the assessed value = net assessed value
    3. divide the net assessed value by 100 = taxable amount
    4. multiply the taxable amount by the total millage rate = estimated property tax

If you have multiple properties, it may be wise to hire a reputable tax consultant to review and calculate the estimated property tax you must pay.
 

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