Property tax is calculated by your local assessor, not by you, and the amount depends on your home's assessed value and your local tax rate

Your property tax bill comes from two numbers multiplied together: the assessed value of your home (set by your county or municipal assessor) and the local tax rate (set by your city, county, school district, and sometimes special districts). Neither number is the same everywhere. A home worth $300,000 in one county might have a tax bill half the size of an identical home in another county, because tax rates vary widely by location.

You do not calculate this yourself. Your local assessor's office determines the assessed value, usually every one to five years depending on your state's rules. Your county tax collector then applies the local rate and sends you a bill. If you have a mortgage, your lender may collect property tax as part of your monthly payment and hold it in an escrow account, paying the bill on your behalf when it comes due.

Key Takeaways

  • Property tax is assessed value multiplied by the local tax rate, and both numbers vary significantly by location and state.
  • Your county assessor determines assessed value, which is often lower than what you paid for the home or what it would sell for today.
  • Tax rates are set by your city, county, school district, and sometimes fire or water districts, and you can find your rate by calling your assessor's office or checking your county website.
  • If you have a mortgage, your lender typically collects property tax monthly and pays the bill from an escrow account.
  • Most states allow homeowners to challenge their assessed value if they believe it is too high, usually through a formal appeal process.

How assessed value is determined

Assessed value is not the same as market value (what your home would sell for) or appraised value (what a bank's appraiser says it is worth). The assessor uses one of three methods, depending on your state and county: the sales comparison approach (looking at what similar homes sold for recently), the cost approach (estimating what it would cost to rebuild your home from scratch), or the income approach (used mainly for rental properties).

Most assessors use sales comparison for residential homes. They look at recent sales of comparable properties in your area, adjust for differences in size and condition, and arrive at an estimated value. Some states require assessments every year; others do them every three to five years. A few states, like California, use a different system where assessed value is based on the purchase price and increases only slightly each year, regardless of market changes.

The assessed value on your tax bill is usually lower than the actual market value of your home. This is intentional — most states assess at a percentage of market value, often 50 to 100 percent depending on the state. Your county assessor's office can tell you what percentage applies in your area and what they assessed your home at.

Finding your local tax rate

Tax rates are expressed as a percentage or as a dollar amount per $1,000 of assessed value. A rate of 1.2 percent means you pay $1,200 in tax for every $100,000 of assessed value. A rate of $12 per $1,000 means the same thing. Rates vary from under 0.5 percent in some states to over 2 percent in others.

Your local rate is a combination of rates set by different taxing bodies. Your city sets one rate, your county sets another, your school district sets another, and you may also pay rates for a fire district, water district, or library district. All of these are added together to create your total effective tax rate. You can find the breakdown by calling your county assessor's office or checking your county's tax assessor website — most publish rate information online.

Tax rates can change year to year. A school district might raise its rate to fund new construction, or a city might lower its rate due to budget changes. Your tax bill can go up or down even if your home's value stays the same, because the rate changed.

What happens if you think your assessed value is too high

Most states allow homeowners to challenge their assessed value through a formal process, usually called an appeal, protest, or grievance depending on your state. The deadline to file is typically 30 to 60 days after you receive your tax bill, though some states give you longer. Missing the deadline usually means you cannot challenge that year's assessment.

To file an appeal, you typically submit a form to your county assessor's office stating why you believe the value is wrong. Common reasons include recent damage to the home, an error in the property description (wrong square footage, for example), or sales of comparable homes that sold for less than the assessed value. You may need to provide documentation — photos of damage, a recent appraisal, or printouts of comparable sales.

If the assessor does not lower the value after your initial appeal, most states have a second level of appeal, usually to a county board of assessment appeals or a state tax tribunal. This process is free or low-cost, though some people hire a property tax consultant or attorney to represent them. The process can take several months to over a year.

How escrow accounts work with property tax

If you have a mortgage, your lender almost always requires you to pay property tax through an escrow account. You pay one-twelfth of your estimated annual tax bill each month as part of your mortgage payment. Your lender holds this money in an account and pays your tax bill when it comes due.

Once a year, usually after your tax bill arrives, your lender recalculates your monthly escrow payment based on the actual bill. If your tax went up, your monthly payment goes up. If it went down, your payment goes down. Your lender will send you a statement showing the old payment, the new payment, and the reason for the change.

If there is a shortage in your escrow account — meaning the actual tax bill was higher than what was collected — your lender may ask you to pay the difference in one lump sum, or spread it over several months. If there is a surplus, your lender may refund it to you or credit it toward future payments, depending on your loan agreement and state law.

Homestead exemptions and other tax reductions

Many states offer a homestead exemption, which reduces the assessed value of your primary residence by a fixed amount or percentage. This lowers your tax bill without you having to do anything after you claim it once. The exemption amount varies by state — some offer $25,000 off the assessed value, others offer a percentage reduction, and some offer different amounts based on age or income.

To claim a homestead exemption, you typically file a form with your county assessor's office in the year you buy the home or move to a new state. You may need to provide proof that the home is your primary residence, such as a driver's license or voter registration. Once approved, the exemption usually applies automatically each year unless you move or sell the home.

Other tax reductions may be available if you are over a certain age, disabled, a veteran, or a surviving spouse. These programs vary widely by state and county. Your assessor's office can tell you which programs you might be may be able to access for based on your situation.

Frequently Asked Questions

Can my property tax bill go down if my home loses value?

Yes, but only if your assessor reassesses your home and finds the new value is lower. If your home was damaged, the market drops significantly, or you can show that comparable homes sold for less, you can file an appeal. However, assessments do not happen every year in all states, so you may have to wait for the next assessment cycle or file an appeal to trigger a reassessment.

What if I disagree with the assessed value but miss the appeal deadline?

In most states, you cannot appeal that year's assessment after the deadline passes. However, you can usually appeal the next year's assessment when it comes out. Some states allow late appeals in cases of hardship or if you did not receive notice of the assessment, so contact your assessor's office to ask about exceptions.

Does my property tax include school taxes?

Yes, in most states. School district tax is one of the components added together to create your total tax rate. Your tax bill usually shows a breakdown of how much goes to the city, county, school district, and any other taxing bodies. If you want to know exactly how much of your bill funds schools, check the breakdown on your tax bill or ask your assessor's office.

What happens to my escrow account if I pay off my mortgage?

When you pay off your mortgage, your lender will close the escrow account and refund any remaining balance to you, usually within 30 to 45 days. After that, you are responsible for paying your property tax bill directly to your county tax collector. You will receive a bill in the mail, usually once or twice a year depending on your county's schedule.

Can I deduct property tax on my federal income tax return?

You can deduct property tax if you itemize deductions on your federal return, but there is a limit. As of 2024, you can deduct up to $10,000 per year in combined state and local taxes (including property tax, income tax, and sales tax). This limit applies whether you are married filing jointly or single. Talk to a tax professional about whether itemizing makes sense for your situation.