Understanding Your Real Estate Tax Bill
October 14, 2009 – 12:18 pmSo many of you emailed me about this issue that I decided to write an article on it.
It’s not just the leaves that are dropping this autumn. For some new homeowners, it’s also their jaws as they open their 2009 tax bills. If your taxes went up significantly this year it’s for one of two reasons. Either you were re-assessed based on the sales price of the home you purchased or you were switched from a 4% to a 6% ownership ratio. Any other differences in the tax bills from last year until now are relatively small in comparison. Before you petition the county for an appeal, it may help to understand how county taxes are derived.
Appraisal and Assessment
It all starts with Appraisal and Assessment. Current law for Charleston County mandates that property be re-assessed for taxes every five years. This law began in 2000 so reassessment took place in 2005 and is scheduled to take place again in 2010. Assessment is based on Appraised Fair Market Value (FMV) or what comparable properties have sold for in the last year of reassessment. In other words, 2009 properties are appraised at what they would have sold for in 2005.
If the property in question was purchased since 2005, the property is reassessed based on the actual sales price. Let’s look at a step by step example.
Suppose a James Island rental property is purchased in 2008 for $260,000.00. It is re-assessed in 2009 and appraised for tax purposes at $250,000.00 ($10,000 is considered non-taxable land value.)
The appraised value is then multiplied by an Assessment ratio; 4% for owner occupied properties and 6% for investment properties. In this case, as an investment property, it would be 6% x $250,000 = $15,000 Assessed Value.
Millage Rates
Next the county multiplies the Assessed value times a millage rate. This rate is calculated for each tax district in the county. James Island millage in district 31 is currently .2386, but in district 32 is .2134. Since our sample property is in district 31, $15,000 Assessed value is multiplied by .2386 = $3579.00.
Next, credits and fees are applied according to homeowner’s status or other county services. Homeowners over 65 years of age, for example, get a discount on their primary residence so that the first $50,000 of value is not taxed. This is called a Homestead Exemption credit. Credits can also include local sales tax options voted on during election years.
Credits and Fees
Fees represent each taxpayers costs for services like trash pick-up and storm water maintenance.
Once all credits and fees are applied, the final tax amount is rendered. Fortunately, Charleston County also lists the amount of last year’s bill so you can see if it rose significantly or just a bit.
New Ownership
For many homeowners and investors, the shock of the tax bill doesn’t occur the first year because taxes are billed in arrears. During the first year of ownership the bill is based on the appraised value as of January 1st of that year. If the property is sold during that year, the appraised value jumps to the new sales price on the next year’s tax bill.
If a property does not change ownership, the only other ways it can rise is Assessment ratio or millage. A 4% ratio is given to all primary residences but a homeowner must apply for that ratio after the purchase. Normally within a few weeks of new ownership the county will send out an assessment sheet indicating the current status. If the homeowner fails to correct it at that time, the bill may be assessed incorrectly. This is especially true for homeowners who purchase property that was prviously rental property.
Millage rates change every year based on what each county determines it needs to provide county services. Normally this rise will be very small, approximately 1-3% per year. Millage rates cannot be appealed.
If after reading this article you still feel your tax bill is not correct, your best solution is to call the county tax auditor.
