Beginning October 1^st, home and property owners across Alabama will avoid unexpected and dramatic property tax increases thanks to the successful legislative efforts of the Alabama Association of REALTORS® and its partners in the property tax coalition.

Property taxes have skyrocketed in the past five years as some counties increased taxes by as much as 68%, leaving homeowners, landowners, and businesses suffering. House Bill 73 caps annual property tax assessment increases at 7% across the state, providing predictability and stability for homeowners, particularly in rapidly appreciating markets where property values —and consequently, property taxes — can rise sharply.

“While property taxes are crucial for funding essential infrastructure and public services, it's equally important to recognize the everyday financial burdens faced by the average homeowner,” said RaJane Johnson, broker/owner of Agency on Main in Hartselle. “Capping property tax increases at 7% strikes a balance between supporting community needs and ensuring that families are not overwhelmed by rising living costs, preserving affordability and stability in local communities.”

Property taxes are a key consideration for homeowners given their direct impact on the cost of owning a home. Yet for many, understanding how these taxes are calculated and how they influence local markets often remains a mystery. 

“Property taxes impact homeowners by adding to the overall cost of owning a home, affecting affordability and long-term financial planning,” said Johnson. “Property taxes also influence home values, as areas with higher taxes often offer better public services, such as schools and infrastructure.”

With the recent passing of House Bill 73, it’s a timely opportunity to dissect the intricacies of property taxes.

Property taxes are determined based on a few key components:

• Appraised Value: Appraised value is the market value of the property, which is determined by the local county tax assessor based on property type, location and condition.
• Assessment Rate: The assessed value is typically a percentage of the market value of the home. The classification of the property — residential, agricultural, commercial and utility — determines the rate. Residential properties in Alabama are assessed at 10% of the appraised value. 
• Millage Rate: The millage rate is the tax rate applied to the assessed value, expressed in mills (one mill equals 1/10 of a cent, or $1 per $1,000 of assessed value).Millage rates vary by county, city and school district. 

Further, exemptions, such as the homestead exemption, which reduces the taxable value for primary residences, can also influence an individual’s property tax amount.

Local tax rates vary significantly depending on the municipality or county in which a property is located. These rates are influenced by the budgetary needs of local governments, which use property tax revenues to fund public services such as schools, roads and emergency services. As a result, two similarly valued homes in different areas can have vastly different property tax bills.

It’s important for homeowners to be aware of local tax rates when purchasing a home. Areas with higher tax rates may offer more services, but this comes at a cost. Conversely, areas with lower tax rates may provide fewer services but could be more affordable.

While property taxes are an inevitable part of homeownership, there are steps homeowners can take to manage their tax liabilities effectively:

1. Understand Your Assessment: Review your property’s assessment notice to ensure that the assessed value accurately reflects the market value of your home. If you believe the assessed value is too high, you have the right to appeal the assessment. 
2. Utilize Exemptions and Deductions: In addition to the homestead exemption, there are other exemptions homeowners can apply for to reduce the taxable value of their primary residence. Seniors, veterans or those with disabilities in particular may qualify for additional exemptions. 
3. Stay Informed and Budget Accordingly: Staying informed about local millage rate changes and managing your budget appropriately can minimize financial surprises.