After the budget and the customary uproar, both justified and unjustified, I realized that there may be people out here burning their panties about property tax but have no idea how it is supposed to work. Let me be clear off the bat, I support property tax…HARD…like a good bra or a jockstrap.
Since I recently completed a valuation on my property as part of the mortgage refinancing process (yeah, I does follow the same advice I give allyuh) I decided this might a good time for a quick tutorial on how property tax is supposed to work. I’m not getting into the whole discussion about local government and “I not seeing where my tax dollars going” and “corruption” and blah blah blah. If that is your scene, write your Councilor/MP/Pastor/diary and get off my page.
Now seeing that I am not a tax expert by any means, I will just do a basic calculation for a residential property, using my own as an example.
So basically there are a different tax rates applicable to different classes of property. The rate for residential property is 3% of the Annual Taxable Value (ATV). The ATV is calculated by taking the Annual Rental Value (ARV) minus 10%. This ARV is the annual rent a similar property can fetch in the open market….and here is where the controversy lies but we’ll get back to that later.
So here’s the calculation for my property. The valuation report listed the monthly market rent at $5,000 so this is a proxy for the monthly rental value. Now we need to get the ATV. So we would either reduce the $5,000 by 10% and multiply by 12 OR if you’re feeling especially frisky you can multiply the $5,000 by 12 and reduce that figure by 10%. Either way you should be shading the multiple choice bubble for $54,000 and not the bubble for Toussaint Louverture. Finally, the $54,000 multiplied by 3% gives you an annual property tax total of $1,620 or $135 per month.
To put that figure into context, in 2009, the last year property tax was due and payable, I paid a whopping $201.60. Yeah, for an entire year. If that seems crazy to you it is. How do I as a rational being expect the authorities to provide the necessary amenities to help me enjoy my property on the taxes that are less than the price of a bottle of Gordon’s gin?
Now to the controversy. The issue people have is the seemingly arbitrary assignment of value to their property by the authorities for inclusion in something called the Valuation Roll, which I imagine is a big book of valuations not a frosted pastry good from Linda’s Bakery.
In conclusion, from my example, if the valuation of your property and more importantly the rental value is done on a reasonable and accurate basis then it should result in a reasonable property tax payment, IN THEORY. However, as we all know, the devil is in the details.