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How property taxes are figured out. Before buying a home, it is important for real estate beginners to understand how the amount you pay in property taxes is decided upon. Everyone pays a different amount, depending upon how much a home is worth. The tax rate for an area is the same throughout that area, but due to varying home values, the property tax you pay may be a little higher or lower than your neighbors.

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Property taxes provide much of the revenue for local and state governments. When property values go up, property tax collections also go up, which means that there are added dollars for public services and schools — and even tax refunds. If property values decline, the government programs are short and there is pressure to raise your taxes to compensate for the deficits.