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What Is a Property Tax Levy?

Local governments raise money by levying taxes on properties within their jurisdiction.
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  • Written By: Scott Daniel
  • Edited By: C. Wilborn
  • Last Modified Date: 18 June 2014
  • Copyright Protected:
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    Conjecture Corporation
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While its function and implementation differs from state to state and country to country, in general a property tax levy is the amount of money raised by a local government through taxing properties within its jurisdiction. The money raised is then usually put toward public services, such as fire and police departments, schools, libraries, etc. The property tax levy is often the last item of a local budget to be calculated. As local officials are creating a budget, they will often first account for all the other revenue, such as fees and other taxes, and use the property tax levy to make up for any shortfalls in the budget.

The property tax rate is generally calculated by dividing the property tax levy — or the total amount of money needed to be raised from property taxes — by the total value of all properties in the affected area. This percentage is then applied to all properties. Property taxes are ad velorem taxes, meaning the tax is based on the value of the item being taxed, similar to sales tax; this differs from taxes or duties based solely on weight or quantity. With an ad velorem tax, an individual with a more valuable property will pay more than someone with a less valuable property, although they will each be paying the same percentage on their respective properties.

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This real estate tax is usually paid annually, with the total amount based on the value of the property each year. While a property's value can change year to year, those changes are usually minimal; because of this, property owners will often pay their tax based on the same value each year. The value of the property can usually be reassessed as often as the owner feels necessary, however. Many property owners are continually pushing for lower property taxes, since it is an annual tax.

While different areas of the world are organized differently, monies from property taxes will often be distributed from larger areas, like states, counties, or provinces, to smaller areas, like cities and towns. This can help to ensure the money raised from larger governments is appropriately shared with smaller governments. This also means that a property owner may be taxed multiple times for the same property — once each for each municipality.

The total money raised through property taxes for a given municipality constitutes a property tax levy. That money then helps make up for any budget shortages and helps fund various public services. In some jurisdictions, property taxes are a significant source of revenue.

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