Understanding the basics of property tax

New property owners might wonder, "Do you have to pay property taxes forever?" Unfortunately, the answer is yes - you still need to pay for community and municipal services through taxes even after paying off your mortgage. However, there are ways you can potentially reduce your property tax bill and ease the burden of ongoing costs.

To help you understand a bit more about property taxes, here are some of the basic facts to know:

What home improvements increase property taxes?

Many renovations and upgrades increase the overall value of your property, which in turn can increase your property taxes. The changes you can expect to increase your bill include:

• Additions to your home's living space.
• Structural changes resulting in more bedrooms.
• Decks & other attached outdoor structures.
• Outbuildings like sheds or accessory dwelling units.
• Finishing a basement or attic.

Ask for your property tax card

Tax cards allow homeowners access to information about what the town has collected about the property. The cards contain data on the size and precise dimensions of the property, as well as the size and types of furnishings in your property.

Other documents may contain sections describing special features and notations about improvements to existing structures. Take note that the card may have a number of errors; bring them to your tax assessor for further consideration and investigation of the matter.

Understand your tax bill

Property taxes are determined by two important variables: tax rates and current market values. Cities, counties and states can all have different tax rates, and some municipalities change their rates every year.

If you are concerned you are paying too much, investigate your local government's process for appealing your bill. The more familiar you are with your property tax bill, the easier you'll be able to spot any potential issues.

What's the best way to reduce property taxes?

While the tax rates are determined by local governments, there are some ways individual homeowners can reduce their property taxes. One of the simplest ways is to limit the amount and scope of your home improvement projects. Consider the impact each potential improvement will have on your property value and adjust your plans accordingly.

Another way to reduce your property taxes is through exemptions. There are tax exemptions available for homesteaders, seniors, veterans and some types of agricultural property. To potentially save a bundle, investigate whether your property might be eligible for an exemption.

While you do have to pay them forever, better understanding property taxes helps you make better financial decisions as a homeowner.