Right after the New Year, I often get calls from my clients who are stunned and confused their new real estate tax bill. They don’t understand why the bill they just received is so much higher than the one they paid for November 1, which was for the same Fiscal Year.
Here’s how to understand how your real estate taxes are calculated and what your tax bill represents.
First, a “Fiscal Year’ is a period that your community uses for accounting purposes. It is not the same as a calendar year. In fact, if your community sends quarterly tax bill, the Fiscal Year begins on July 1 and runs to June 30.
Second, the first two tax bills that you receive for the Fiscal Year (due August 1 and November1) are calculated using the previous year’s assessed values and tax rates and they are called “preliminary tax bills”. Your community won’t set the new assessments until the fall and the new tax rates won’t be set until mid-December.
Third, the tax bill that is sent to you by January 1 (due February 1) represents the “Actual Bill” for the Fiscal Year. Your community uses that new assessment of your property plus the new tax rate to determine the amount due. Next, it subtracts the preliminary amounts. The remaining balance is divided by 2 so that the payments due on February 1 and May 1 make up the difference between what was paid on the Preliminary Bills and what is due for the entire fiscal year. That’s why the amounts due for February and May are different from the amounts due for August and November even though they are all in the same Fiscal Year.