Tax hits home

Property taxes affect how much house you can afford to buy, as well as your ability to sell it in the future. Your monthly house payment is made up of your monthly mortgage repayment plus one-twelfth of your annual property taxes (as well as private mortgage insurance, if required by your lender). The higher the property taxes, the higher your monthly payment -- and the less mortgage you can afford. Low property taxes are prized by most buyers for this reason, so they also can be an attraction when selling your home.

Comparing property taxes among different parts of town can be confusing. Each city and county puts its own stamp on the process, so you often can't make direct comparisons. Here are some basics to help.

Property tax rates are set by elected officials and pay for many of the services provided by cities and counties -- for example, fire and police protection, road repairs and public schools.

There are three factors that determine how much property tax you will pay: your home's assessed value, homestead exemptions offered by your local government and the millage rate.

To calculate your assessed value, the tax assessor determines what your home is worth (the "fair market value"), then multiplies it by a percentage (in the Atlanta area, almost always 40 percent).

A homestead exemption is the amount subtracted from your assessed value (sort of like a standard deduction that the IRS allows on income taxes). There is a standard homestead exemption that is available to all people living in homes they own (not available for commercial or rental property), as well as special exemptions for senior citizens, veterans and the disabled. You must apply to your local tax office for a homestead exemption after buying your home.

The millage rate is the rate of taxation. A mill is equal to a dollar of tax for each $1,000 of assessed value.

Millage rates can vary greatly. Urban and suburban counties typically offer more services than rural areas and their property taxes are usually higher. Millage rates also may reflect how well the government is run.

For example, the millage rate in unincorporated Cobb County is 29.14; in the city of Atlanta, it is 46.77. And in DeKalb County, the HOST (Homestead Option Sales Tax) uses a permanent 1-cent sales tax to fund a 100 percent homestead exemption for the county government portion of a homeowner's property tax bill (slightly less than half of the total).

Cities usually add another layer of taxation to county property tax rates, so be sure to ask about any additional city taxes. Since property values change over time, a government will periodically reassess the estimated values of its homes. Look to see the last time your property was reassessed -- if it has been several years, prepare for the assessed value to increase after your purchase (and for your property taxes to rise).