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Chapter 11. Understanding Escrow Accounts > Escrow Is for Taxes and Insurance

Escrow Is for Taxes and Insurance

An unavoidable downside of owning property is the associated real estate taxes. These taxes are usually assessed by the city or county, and go toward things such as public schools, police, and other municipal services. Property tax is based on the value of the property in question, and is usually expressed as the annual tax per $100 of assessed valuation. This works out the same as a straight percentage. Thus, if your assessed value is $165,000 and the tax rate is 1.05, your annual property tax will be

165,000 × 1.05% = $1,732.50


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