Property tax is a tax paid on property owned by an individual or other legal entity, such as a corporation. Most commonly, property tax is a real estate ad-valorem tax. It is calculated by local taxing entities where the property is located and paid by the owner of the property. The tax is usually based on the value of the owned property, including land. However, jurisdictions also tax tangible business personal property, such as inventory and equipment.
The amount owners owe in property tax is determined by multiplying the property tax rate by the current market value of the property in question. Most taxing authorities will recalculate the tax rate annually. Almost all property taxes are levied on real property, which is legally defined and classified by the state guidelines. Real property includes the land, structures, or other fixed buildings.
The local governing body will use the assessed taxes to fund water and sewer improvements, and provide law enforcement, fire protection, education, road and highway construction, libraries, and other services that benefit the community.