Property tax is calculated by multiplying your home's assessed value by your local tax rate

The formula is straightforward: assessed value × tax rate = property tax owed. Your county or municipality assesses what your property is worth, then applies a percentage (the tax rate) to that number. The result is what you owe each year. The catch is that assessed value and market value are often different, and tax rates vary widely by location — sometimes by thousands of dollars even for identical homes in neighbouring counties.

Most homeowners pay property tax through their mortgage lender as part of an escrow account. Your lender collects a portion each month, then pays the full bill to your local tax assessor when it comes due. If you own your home outright, you pay the tax bill directly to your county or municipality, usually once or twice a year depending on where you live.

Key Takeaways

  • Assessed value is set by your county assessor and is usually lower than what your home would sell for on the market.
  • Tax rates are set by your local government and are expressed as a percentage or as dollars per thousand dollars of assessed value.
  • You can find both your assessed value and your tax rate on your property tax bill or through your county assessor's website.
  • Challenging an assessment is possible if you believe your home was valued too high, and the process varies by county.

Finding your assessed value and tax rate

Your property tax bill shows both numbers, so start there. If you don't have a recent bill, visit your county assessor's website — most allow you to search by address or parcel number and view the assessed value for free. The assessor's office is a county-level agency, not a state or federal one, so you need the office for the county where your property sits.

The tax rate is also on your bill and is usually expressed one of two ways: as a percentage (for example, 1.2%) or as a dollar amount per thousand dollars of assessed value (for example, $12 per $1,000). Both mean the same thing. If your bill doesn't show the rate clearly, call your county assessor's office and ask for the millage rate or effective tax rate for your property's location.

The step-by-step calculation

Once you have both numbers, the math takes one or two steps depending on how your tax rate is expressed.

If the rate is a percentage: Multiply the assessed value by the rate as a decimal. If your home is assessed at $300,000 and the rate is 1.2%, multiply $300,000 by 0.012. The result is $3,600 in annual property tax.

If the rate is per thousand: Divide the assessed value by 1,000, then multiply by the rate. If your home is assessed at $300,000 and the rate is $12 per $1,000, divide $300,000 by 1,000 to get 300, then multiply by $12. The result is also $3,600.

The two methods always produce the same answer. Use whichever format matches what you see on your bill or the assessor's website.

Why assessed value differs from market value

Your home's assessed value is not what it would sell for. Assessors use formulas based on comparable sales, property condition, and location — but they don't inspect every home every year. In fast-moving real estate markets, assessed values lag behind actual prices. In declining markets, they may be higher than what buyers would pay.

Some states use a percentage of market value as the assessed value. Others cap how much the assessment can increase each year, even if the market rises sharply. A few states reassess every few years rather than annually. Check your state's rules on your assessor's website or by calling the office directly.

How tax rates are set and what they fund

Your local government — usually the county, city, or school district — sets the tax rate based on its budget. If the school district needs $50 million and the total assessed value of all property in the district is $5 billion, the rate is set to collect that amount. When budgets grow, rates often rise. When property values rise sharply, rates sometimes fall to keep revenue stable.

Property tax funds schools, roads, police, fire departments, libraries, and other local services. Your bill may break down how much goes to each entity. If you want to know why your rate is what it is, your county assessor's office or the school district's finance office can explain the budget behind it.

Challenging your assessed value

If you believe your home was assessed too high, most counties allow you to file a formal challenge called an appeal or a protest. The process and important date vary by state and county — some allow appeals once a year, others twice. Check your county assessor's website for the important date and the form you need.

To make your case, gather evidence: recent appraisals, comparable sales of similar homes in your area, photos of any damage or needed repairs, or a professional home inspection. The assessor's office will review your evidence and either adjust the value or uphold the original assessment. If you disagree with the result, some counties allow a second appeal to a board of review.

Estimating property tax before you buy

If you're shopping for a home, you can estimate the annual property tax before you make an offer. Find the assessed value of the home you're interested in through the county assessor's website, then multiply by the local tax rate. This gives you a rough idea of what you'll owe each year. Keep in mind that the assessed value may change after you buy, and tax rates can shift with local budgets.

Some counties reassess property after a sale, which can raise the assessed value and your tax bill. Ask your real estate agent or the county assessor whether this is standard practice in your area. If it is, factor that into your budget for the first year after purchase.

Frequently Asked Questions

Can I deduct property tax from my federal income tax?

Yes, if you itemize deductions on your federal return. The limit is $10,000 per year for all state and local taxes combined (including property tax, income tax, and sales tax). You must file Form 1040 and Schedule A to claim the deduction. Consult a tax professional to see whether itemizing saves you money compared to taking the standard deduction.

What happens if I don't pay my property tax bill?

Your county can place a lien on your home and eventually foreclose if the debt goes unpaid for several years. The exact timeline varies by state. If you're struggling to pay, contact your county assessor's office about payment plans or hardship programs that may be available in your area.

Does my property tax rate change every year?

The rate can change if your local government adjusts its budget, but it usually stays the same year to year. Your assessed value may change annually or on a longer cycle depending on your state. Even if the rate stays the same, your bill can rise if your assessed value increases.

How do I find out what my neighbours pay in property tax?

Most county assessor's offices make assessed values public record. You can search by address on their website and see what other homes in your area are assessed at. However, actual tax bills depend on which school districts and municipalities the property falls within, so two homes with the same assessed value may owe different amounts.

Is property tax the same as a mortgage payment?

No. Property tax is a separate bill from your mortgage. If you have a mortgage, your lender usually collects property tax through escrow and pays it on your behalf, but it's not part of the mortgage principal or interest. If you own your home outright, you pay property tax directly to your county.