Property tax starts with your home's assessed value, multiplied by your local tax rate

Property tax is calculated using a straightforward formula: assessed value × tax rate = property tax owed. The assessed value is what your local assessor says your property is worth for tax purposes — not the price you paid or what it would sell for today. The tax rate is set by your county, city, or school district and is usually expressed as a percentage or as dollars per $1,000 of assessed value. Multiply those two numbers and you get your annual bill.

The catch is that assessed value and market value are often different. A home worth $400,000 on the open market might be assessed at $350,000 or $420,000 depending on your state's assessment practices and how recently your property was reassessed. That gap between what your home is worth and what it is assessed at is where most confusion starts.

Key Takeaways

  • Assessed value is determined by your county or township assessor, usually through a physical inspection or market comparison, and is the number used to calculate your tax bill.
  • Tax rates vary by location and are set by your county, city, school district, and other local taxing bodies — the same property in different counties can have very different tax bills.
  • Most states reassess property every one to five years, and your assessed value can change even if you do nothing to your home.
  • You can request a reassessment or file a formal challenge if you believe your assessed value is too high, though the process and deadlines vary by state.

How assessors determine your home's assessed value

Your local assessor's office is responsible for setting the assessed value. They do this in one of three ways: a physical inspection of your property, a comparison to similar homes that recently sold in your area, or a combination of both. If your home has not been inspected in several years, the assessor may use only sales data from comparable properties. If you have made major renovations, the assessor may schedule an inspection to account for the improvements.

The assessed value is usually a percentage of market value, and that percentage varies by state. Some states assess at 100 percent of market value; others assess at 50 percent, 25 percent, or some other fraction. A few states use different assessment rates for different property types — residential, commercial, agricultural. You can find your state's assessment rate by calling your county assessor's office or checking their website.

Assessments typically happen on a cycle. Your property might be reassessed every year, every three years, or every five years depending on where you live. Even if nothing changes on your property, the assessed value can go up or down based on what similar homes in your neighborhood have sold for recently.

Understanding tax rates and how they are set

Tax rate is the percentage or per-$1,000 amount applied to your assessed value. A tax rate of 1.2 percent means you pay $1.20 in tax for every $100 of assessed value. A rate of $12 per $1,000 of assessed value is the same thing. Tax rates are set by your county, city, school district, and sometimes special districts like fire protection or water management. Each of these bodies sets its own rate, and they add together to create your total tax rate.

Tax rates are public information and change annually. Your county assessor's office publishes the rates for your area, usually in late summer or early fall. If your assessed value stays the same but the tax rate goes up, your bill will go up. If the tax rate stays the same but your assessed value increases, your bill will go up. Both can happen in the same year.

Some states cap how much the tax rate can increase year to year, or cap how much the assessed value can increase. California's Proposition 13, for example, limits assessed value increases to 2 percent per year unless the property is sold. Other states have no cap. Check your state's rules to understand whether your bill is protected from large jumps.

Working through a real calculation example

Say your home is assessed at $300,000 and your total tax rate is 1.1 percent. The math is: $300,000 × 0.011 = $3,300 per year. If your tax rate is instead expressed as $11 per $1,000 of assessed value, the math is: ($300,000 ÷ $1,000) × $11 = 300 × $11 = $3,300. Both methods give the same answer.

Now say your assessed value increases to $320,000 the next year because your neighborhood's home values rose, but the tax rate stays at 1.1 percent. Your new bill is: $320,000 × 0.011 = $3,520. That is a $220 increase. If instead your assessed value stayed at $300,000 but the tax rate rose to 1.15 percent, your bill would be: $300,000 × 0.0115 = $3,450. That is a $150 increase. Both scenarios happen regularly, and in some years both happen at once.

What happens if you disagree with your assessed value

If you believe your assessed value is too high, you can file a formal challenge called an assessment appeal or reassessment request. The process and deadline vary by state and county. Most counties have a window — often 30 to 60 days after you receive your assessment notice — during which you can file. 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 and provide evidence that your assessed value is wrong. Evidence might include a recent appraisal, a professional home inspection, sales prices of similar homes in your area, or photos showing your home is in worse condition than comparable properties. Some counties hold informal hearings where you can present your case; others use a formal appeal board.

Success is not may provide. The assessor's office will review your evidence and decide whether to lower, keep, or sometimes raise your assessed value. If you disagree with their decision, many states allow a second appeal to a county board or state tax court, but this usually requires hiring a tax attorney or appraiser, which costs money.

How homestead exemptions and other deductions reduce your bill

Many states and counties offer homestead exemptions, which reduce your assessed value if you live in the home as your primary residence. A homestead exemption might reduce your assessed value by a flat dollar amount — say $50,000 — or by a percentage. If your assessed value is $300,000 and you receive a $50,000 homestead exemption, your taxable value becomes $250,000, and your tax bill is calculated on that lower number.

Other deductions exist for seniors, veterans, people with disabilities, and agricultural properties. Some states offer a property tax freeze, which locks your assessed value at its current level even if your home's market value rises. These programs have income limits, residency requirements, and application deadlines. You must request them; they do not happen automatically. Contact your county assessor's office to learn which deductions you may be may have access to to and how to request them.

Frequently Asked Questions

Why is my assessed value different from what I paid for my home?

Assessed value and purchase price are calculated differently. Your purchase price is what you and the seller agreed on at that moment. Assessed value is what the assessor believes your home is worth for tax purposes, based on recent sales of similar homes and the condition of your property. If you bought your home years ago, the assessed value has likely changed based on neighborhood trends. If you bought recently, the assessed value may still be based on older comparable sales.

Can my property tax bill go down?

Yes, if your assessed value decreases or your tax rate decreases. Assessed value can drop if your home needs major repairs, if comparable homes in your area have sold for less, or if you successfully appeal your assessment. Tax rates can drop if your local government reduces its budget, though this is less common. In most years, bills stay flat or increase.

How often does my assessed value change?

This depends on your state and county. Some reassess every year, others every three to five years. Even in years when your property is not formally reassessed, your assessed value can change if your county updates its assessment rolls based on recent sales data. You will receive a notice when your assessed value changes; read it carefully and note the appeal deadline.

What is the difference between assessed value and market value?

Market value is what your home would sell for today if you listed it. Assessed value is what the assessor says it is worth for tax purposes. They are often different because assessed value is based on older sales data, uses a different calculation method, or is capped by state law. Market value is determined by actual buyers and sellers; assessed value is determined by government assessors.

Do I have to pay property tax if I own my home outright?

Yes. Property tax is owed by the property owner, whether the home is paid off or financed. If you have a mortgage, your lender may require you to pay property tax through an escrow account as part of your monthly payment. If you own the home outright, you receive a bill directly from your county and must pay it yourself.