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Property tax is usually paid once a year by those that own one form of property or the other as dictated by the local government in which you own property. However, because not everyone can afford to make the payment at a go, there is a provision called a property tax payment plan to facilitate payments in installments.

What is property tax?

Property tax refers to the tax paid on real estate and other kinds of property. The amount accrued from this tax is one of the primary sources of income for state governments and local governments in the United States of America.

Property tax is imposed by a local government on land, buildings, and other kinds of personal property that are bought or owned in the jurisdiction of that local government. Tax is usually paid every year on land whether or not it has buildings erected on it.

The value of property varies over time and it depends on the improvements that have been made to it (like renovations) or the value of properties around it. If the value of a property is deemed as being too high by property owners, they are allowed to appeal the property appraisal. Property taxes are adjusted annually depending on fiscal needs and the need to compensate for inflation.

The value of the real estate and the appropriate tax rate can be determined by either of the following:

• Market value: This is the value of a property asset on the open market.

• Assessed value: This is the value that a municipality places on it for deciding the amount of property tax that is due.

• Appraised value: This refers to the value that a private assessor places on it and it is the value that is used when buying or selling the property.

• Assessment ratio: This is the ratio of the assessed value of a property to its market value.

For example, if the assessed value of your home is $400,000 in a municipality that charges a 4 percent property tax rate for residential properties, then you owe $16,000 in taxes for the current tax year.

In some states, you pay property tax on vehicles like boats, cars, and RVs (recreational vehicles). When the vehicle is originally registered, you pay part of the fee based on the vehicle’s value. That represents the property tax and you typically pay just once for as long as you own the vehicle.

What is a property tax payment plan?

Most municipalities offer a property tax payment plan that allows you to pay your property taxes in monthly installments instead of paying it once every year. With this plan, the amount that translates into your monthly property tax will be deducted directly from your bank account every month and by the end of the year, you would have paid your property taxes in full without attracting any penalty for late payment.

How the monthly property tax payment plan works

For some municipalities, your monthly installment amount is based on 1/12 of the previous year’s tax amount, for the first half of the year. For the second half of the year, the amount is adjusted based on the new annual tax amount. It is usually advised that you join the plan close to the upcoming tax year (end of November) to avoid incurring a one-time administration fee. If you join at any other time within the year, you would be required to pay for previous months plus a one-time administration fee.

If you believe a property tax payment plan will be a good fit for you, put in a request with your local government for a property tax payment plan.