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HOW PROPERTY TAXES ARE CALCULATED

Here is a simplistic explanation for how your property-tax bill is determined. It does not take into account various credits and exemptions that significantly reduce property-tax bills, especially for primary homes.

1. Assessors determine the value of your property, along with that of all other properties within your township and county.

2. Local government bodies separately determine how much money they will raise from property taxes the next year. (This is their levy.) They include city, town and county councils; township advisory boards; school boards; library boards; and special districts such as bus services and airports.

3. The county auditor sends information about assessments and budgets to the Indiana Department of Local Government Finance.

4. The DLGF calculates the tax rate necessary to generate the property tax revenue for each government unit. The basic formula: Levy divided by assessed value times 100 equals rate.

The levy is divided by the total value of property within each district. That answer is multiplied by 100, because tax rates are based on a basis of per-$100 of property value.

Here's an example:
The town of Happyville decides to raise $100,000 to run its offices. That $100,000 is the levy - the total amount property taxes will bring in. All the assessed property in the town totals $5 million. $100,000 divided by $5 million is .02. Multiply that by 100, and the rate would be 2.0, or $2 per $100 worth of assessed valuation. If your home is worth $75,000, the part of your tax bill that finances Happyville would be $1,500. ($75,000 divided by 100 times 2.)

Your total tax bill, though, also includes rates for your county, the school district in which you live, the township in which you live, and a few items for state government. Even the town of Happyville may have several separate rates: for the general fund, for pensions, for parks, and for a capital fund.

Caveat:
Remember that this very simplistic explanation does not include exemptions and deductions that significantly reduce bills. For example, your primary home is eligible for the Homestead exemption, which cuts the assessed value of your house by half, up to$45,000 on a $90,000 home. Your tax bill also is lowered by the property tax replacement credit, money from state sales and incomes taxes that state government sends to local governments to reduce property taxes.

-- Tracy Warner