Your Quick Guide to Virginia State Real Estate Tax

By Dan Caplinger Markets Fool.com

Most people focus on the income taxes they pay to their federal and state governments, spending countless hours preparing returns. But for many people, residential property taxes make up a sizable portion of their overall tax bill. For the roughly 8.4 million residents of Virginia, real estate and land taxes are just a part of the taxes the state charges. Although only those who own real property pay the tax directly, renters can definitely see the impact of Virginia state property tax on their rental payments. Let's take a closer look at the state property tax system in the state in which England established its first permanent settlement in what would later become the U.S.

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Virginia state capitol. Image source: Wikimedia Commons courtesy Anderskev.

How Virginia state property taxes work

Virginia imposes real estate taxes generally at the local level, with county, city, and town governments responsible for the collection of the tax. State law sets some guidelines for how local governments go through the process, but its direct involvement is limited. For instance, the Virginia Department of Taxation does an audit of local government assessments to compare them to actual sales, with the goal of establishing the extent to which assessed values reflect true fair market value. However, there are few limitations on the ability of local governments to set their own tax rates.

As a result, property taxes can vary greatly from place to place. For instance, in Fairfax County, there is a base rate that applies to all real estate throughout the county. However, there are also a dozen add-on rates, not all of which apply to each property. Some taxes are aimed only at commercial properties, while others go toward specific areas in which municipal improvements such as community centers and watershed improvement measures need separate funding.

Tax relief is also available in some areas. For instance, in some jurisdictions, those who are age 65 or older or permanently disabled can get their taxes reduced by 25% to 100%, depending on income. The actual income threshold levels vary among jurisdictions, reflecting in part different standards of living and property values in different locations. Some jurisdictions also impose net worth limitations for tax relief. If tax relief is available in a given area, you must apply to receive it.

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What's the property tax rate in Virginia?

Local tax rates vary widely throughout different cities and counties in Virginia. For example, in Lunenburg, which is in south central Virginia near the North Carolina border, local real estate taxes are just $0.38 per $100 of assessed value. By contrast, in many of the most populous counties along the Potomac, such as Fairfax, Loudoun, and Prince William Counties, base real estate tax rates exceed $1 per $100 of assessed value.

Often, cities will have even higher taxes than unincorporated portions of counties. For example, the highest tax rate found by the Virginia Department of Taxation in 2014 was Manassas Park, at $1.55 per $100 of assessed value. Moreover, when you include certain local add-ons for various purposes, the final rate can be higher than the base rate for your location.

Can you fight Virginia real estate tax?

Residents always have the right to contest an assessment of tax. In general, local governments go through an assessment process to determine their best estimate of fair market value for property within their jurisdiction. If that value doesn't match up with fair market value, homeowners can follow several processes to remedy the situation.

The simplest action is to have the local assessor review the initial finding. Typically, a member of the local assessor's staff will review the assessment with you, giving you a chance to raise objections to any factual errors or misinterpretations in the initial assessment.

Alternatively, independent reviews are available. In some locations, a local board exists to review assessments, with appointments to that board made independently of the assessor's office. Homeowners also have the right to file suit in court to have judicial review of the assessment and appeal process at lower levels. Most of the time, the legal remedy isn't available until local review and appeal processes have been completed.

In general, Virginia property tax is something that every homeowner will have to pay. Because taxes vary greatly from place to place, it's vital to contact local tax authorities to get the latest available tax rates before you decide on buying real estate in a new location. Otherwise, you might get a big surprise at tax time.

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