Calculating Tax Rates
The local property tax is a residual tax that supports the four local governmental units: the county, municipality, school district and special district. Each governmental unit develops a budget, deducts from the budgeted needs all anticipated revenue and the remaining amount (residual) is raised by property tax. Budgets are reviewed and approved by an oversight agency. The Department of Community Affairs and the Department of Education are the oversight agencies for budget approvals. After each budget is approved, certified and transmitted to the county board of taxation, a tax rate can be calculated.
In each municipality the sum of the value of taxable real property and the value of locally assessed business personal property is the ratable base that is used to support local property tax.
Each municipality has a general tax rate that is the sum of several component rates. A municipal general tax rate includes all the applicable rate components from three local governmental units: the county, municipal and school budget. A municipality may also have one or more special district tax rates. Special district tax rates are not a component of the general tax rate. They are calculated and reported separately.
A tax rate expresses the relationship between the levy (the amount to be raised by taxation) and the ratable base (the total assessed value of taxable property for a county or municipality). The county board of taxation calculates a tax rate component by dividing the certified budget by the aggregate assessed value of a municipality after applying applicable debits and credits.
In a basic example:
Total amount to be raised by property taxation = $22,000,000
District aggregate assessed valuation = $500,000,000
Budget ÷ Assessed Valuation = Tax Rate
$22,000,000 ÷ $500,000,000 = .0440
In accordance with New Jersey law, tax rates are expressed as a rate per $100 of assessed valuation. In the example above, the tax rate per $100 of assessed valuation would be .0440 X 100 = $4.40 or $4.40 per $100 of assessed value.
The amount of tax owed by an individual property is calculated by multiplying the assessed value of the property times the tax rate expressed as a decimal. The tax owed on a property assessed at $160,000 in a municipality with a tax rate of $4.40 per hundred would be calculated as follows:
$160,000 assessed value X .0440 (tax rate expressed as a decimal) = $7,040.
It is the responsibility of the county board of taxation to issue and certify tax rates.
Property taxes are due quarterly on or before February 1st, May 1st, August 1st and November 1st. Since the current year’s tax rates are not certified by the board of taxation until the summer, the first and second quarter taxes are one half of the taxes due in the previous tax year. For example: If the amount of taxes in the previous year was $7,040, the first and second quarter billing would be $1,760 for each quarter.
$7040 ÷ 4 (quarters) = $1,760 due February 1st and May 1st.
Once the current year’s tax rate is certified, the third and fourth quarter taxes are calculated by subtracting the “estimated” first and second quarter taxes from the newly calculated current year taxes due and remainder is then divided in half for the third and fourth quarter billing. For example:
If the current year’s tax rate is $4.65 per $100 of assessed value and the property is assessed at $160,000, the taxes due for the current year would be $7,440.
$160,000 assessed value X .0465 (tax rate expressed as a decimal) = $7,440
Since $3,520 were collected for the first and second quarters, the third and fourth quarter billing would be calculated by subtracting this amount from the current year taxes due and then by dividing the remainder in half to determine the third and fourth quarter billing.
$7,440 (current yr. taxes) – $3,520 (1st & 2nd qtrs) = $3,920 (current yr. taxes still due)
$3,920 (current yr. taxes still due) ÷ 2 = $1,960 (3rd and 4th quarter billing)
See your Municipal Tax Collector if you have any additional billing or collection questions.