Property tax explained: how it is calculated and paid

Property taxproperty taxProperty tax is the tax the county, city, school district and other local bodies charge real property owners every year to pay for schools, police, fire and other public services. It is computed on the value the assessor's office assigns to your home, at each body's rate, minus the exemptions you qualify for, such as the primary-residence exemption in many states. If you have a mortgage you normally pay it month by month inside your payment, through the escrow account. It is generally deductible on your federal return if you itemize.See the full definitionClose is the ownership expense that surprises people most, because no one charges it at a register: it shows up in the mortgage payment or in a county bill once or twice a year, and it goes up without warning. This guide explains who charges it, how much people pay, how it is calculated, how it is paid through escrow, which exemptions and appeals exist and what part you can deduct on your federal return.

Typical effective rate in the US; what owners pay divided by the home's value (Census, ACS)

0.94%

What the typical US homeowner pays per year (Census, ACS)

$3,119

To receive your annual escrow statement after the account year closes

30 days²

To repay an escrow shortage of one month's payment or more, if the servicer asks

12+ months²

Who charges it and what for

Property tax is local. It is charged by the county, the city, the school district and sometimes special districts (water, fire, hospital), and it pays for schools, police, streets and services. The federal government charges no property tax; all it does is allow part of it to be deducted on your tax return, as you will see below.

The office that puts a value on your home is usually called the “assessor”, “appraisal district” or “property appraiser”, depending on the state. That office sets the assessed valueassessed valueAssessed value, or assessment, is the value the local government's assessor gives your property to calculate property tax. It is only for taxes: it is not the appraisal a lender orders for your mortgage. The assessor first estimates market value, usually by comparing your home with similar homes that sold recently. In some places the assessment equals full market value, and in others it is a fraction of it. The assessor does not decide how much you pay: that depends on the rates set by the county, the city and the school district.See the full definitionClose; the boards of each jurisdiction set the rates; the county treasurer or tax collector sends the bill and collects.

How much people pay: the typical bill and your state

According to the Census Bureau’s American Community Survey (ACS), the typical US homeowner pays $3,119 a year in property tax. If you divide that medianmedian (typical value)The median is the value in the middle when you sort all the data from smallest to largest: half of the cases fall below it and half above. If the number of data points is even, it is the average of the two middle values. On aquitucasa, when we say "typical value", "typical rent" or "typical income" we mean the median published by the Census Bureau, not the average: the average is pulled up by a few very expensive homes or very high salaries, while the median better describes what an ordinary family experiences. Every figure carries its source and date.See the full definitionClose by the typical home value, $332,700, you get an effective rate of 0.94%. The effective rate is a simple way to compare places: how much tax is paid for each dollar of home value.

Example with real numbers

The tax on a typical home, per year and per month

With national Census (ACS) numbers, not the bill for a real home.

Typical US home value

$332,700

What the typical homeowner pays per year (median)

$3,119

Effective rate (what is paid divided by the home's value)

0.94%

Per month, the tax share that would go into escrow

$261

This is an example with national numbers. With escrow, part of your monthly payment covers the tax and the servicer pays it for you.¹ Your number depends on your county's assessed value, rates and exemptions.

Run it with your numbersMortgage calculator

That national figure hides big differences. The table compares the effective rate and the typical home value in the states that already have their own page on this site; tap the name to see each state’s details.

Property tax and home value by state

State	Property tax (effective rate)	Typical home value
Alabama	0.38%	$209,900
Alaska	1.11%	$352,900
Arizona	0.48%	$394,500
Arkansas	0.55%	$188,000
California	0.7%	$734,700
Colorado	0.48%	$539,400
Connecticut	1.81%	$366,900
Delaware	0.5%	$352,000
District of Columbia	0.58%	$737,100
Florida	0.76%	$359,000
Georgia	0.77%	$303,300
Hawaii	0.27%	$839,100
Idaho	0.49%	$418,600
Illinois	2.01%	$263,300
Indiana	0.74%	$218,200
Iowa	1.39%	$208,000
Kansas	1.29%	$217,200
Kentucky	0.75%	$205,600
Louisiana	0.55%	$216,500
Maine	1.02%	$296,600
Maryland	0.97%	$419,900
Massachusetts	1.07%	$562,100
Michigan	1.25%	$231,600
Minnesota	1.02%	$329,300
Mississippi	0.72%	$169,800
Missouri	0.85%	$230,300
Montana	0.72%	$375,800
Nebraska	1.49%	$238,600
Nevada	0.47%	$435,400
New Hampshire	1.66%	$402,500
New Jersey	2.11%	$454,400
New Mexico	0.7%	$248,100
New York	1.55%	$423,800
North Carolina	0.66%	$288,900
North Dakota	0.99%	$249,900
Ohio	1.31%	$214,800
Oklahoma	0.8%	$199,800
Oregon	0.81%	$477,600
Pennsylvania	1.3%	$254,500
Puerto Rico	0.49%	$131,500
Rhode Island	1.21%	$404,200
South Carolina	0.48%	$259,000
South Dakota	1.06%	$257,400
Tennessee	0.5%	$286,700
Texas	1.49%	$283,800
Utah	0.52%	$489,400
Vermont	1.59%	$316,600
Virginia	0.73%	$383,700
Washington	0.81%	$564,600
West Virginia	0.53%	$162,600
Wisconsin	1.42%	$266,500
Wyoming	0.57%	$309,700

The effective rate divides the median that owners pay by the median home value. Source: Census Bureau (ACS)

A low effective rate does not always mean a low bill: where homes are worth a lot, the tax in dollars can be high. With Census data we also compute what owners pay in each county; it is on your county’s page and on the property tax data page, with source and date.

How it is calculated

The formula is the same almost everywhere; what changes are the names and the percentages in each state:

1. Assessed value. The county office assigns a value to your home, from comparable sales or a formula. In some states that value is a fraction of market value; in others, the full market value.
2. Exemptions. The ones you are entitled to and have claimed are subtracted: the most common is the primary residence (homesteadhomestead exemptionA homestead exemption is a legal protection for the home where you and your family live. It can keep certain creditors from collecting your debts out of your main home, and it can also lower the property tax on that home. In Texas, for example, the residence homestead exemption removes part of your home's value from the tax calculation; to get it you must own the home, live there as your principal residence and apply. State laws vary widely: some cap the amount protected and others depend on the size of the property or the owner's age.See the full definitionClose) exemption, and there are others for older adults, veterans, people with disabilities and widows or widowers, depending on the state.
3. Rates. Each jurisdiction applies its rate to the remaining value; the bill adds them all up.
4. Caps. Some states cap how much the assessed value can rise from one year to the next while you do not sell the home; when you sell, the value resets and the buyer may pay much more than the seller did. In California, for example, yearly increases are capped at 2 percent and the base value is set when the home changes ownership;⁴ in Florida, a primary home with the homestead exemption cannot rise more than 3 percent a year (or the change in the consumer price index, if lower) and is assessed at just value on the January 1 after the change of ownership.⁵

That is why two identical houses on the same street can pay very different amounts, and why the seller’s bill does not tell you what you will pay. Before buying, ask the county what that home would pay with the reset value and your exemptions. The mortgage calculator lets you enter that number and see how your monthly payment changes.

How it is paid: the escrow account

If you have a mortgage, you almost never pay the bill directly. According to the CFPB, the escrowescrow accountAn escrow account is an account set up by your mortgage lender to pay certain property-related expenses on your behalf, mainly property taxes and homeowners insurance. The money comes from a portion of your monthly mortgage payment: each month you contribute a share and the loan servicer pays the bills when they come due. That is why your payment is higher than principal and interest alone, and why it can change when taxes or the insurance premium go up. In some states the word also names the period between the offer and the closing.See the full definitionClose account is set up by your lender to cover certain property expenses; part of your monthly payment funds it, so you pay those costs in small monthly amounts instead of one large bill. Many lenders require that you pay taxes and insurance through escrow, the loan servicerloan servicerThe loan servicer is the company that sends you your mortgage statements and handles the day-to-day tasks of the loan: it processes your payments, answers your questions, keeps track of principal and interest paid and manages your escrow account, if you have one. It can also offer options if you fall behind and, in certain cases, start a foreclosure. It may be the same company that lent you the money or a different one, and it is common for another company to take over the loan after closing.See the full definitionClose manages the account and pays those bills for you, and because taxes and premiums change from year to year, your escrow payment and your total monthly payment change accordingly.¹

Your escrow account's year

1. 1. You pay every month

   Every month

   Part of your monthly payment goes into the escrow account for the tax and the insurance.¹

2. 2. The servicer pays the bill

   Before the deadline

   It must pay on time to avoid a penalty, as long as you are not more than 30 days behind.²

3. 3. Account analysis

   At the end of the account year

   It reviews what came in and went out, and works out your payment for next year.²

4. 4. Annual statement

   Within 30 days

   It sends you the annual statement with what it paid and what it projects.²

5. 5. If there is extra or too little

   After the analysis

   A surplus of 50 dollars or more is refunded within 30 days; a shortage of one month's payment or more can be spread over at least 12 months.²

6. 6. Your payment changes

   The next year

   If the tax or the insurance went up, your monthly payment goes up even if your rate is fixed.¹

There are federal rules for that account. Under Regulation X, the servicer must analyze the account at the end of each computation year and send you the annual statement within 30 days; the cushion it may require may be no greater than one-sixth of the estimated annual payments; if there is a surplus of 50 dollars or more, it must refund it within 30 days; if there is a shortage of one month’s payment or more, it may require you to repay it in equal monthly payments over at least 12 months; and it must pay taxes and insurance on or before the deadline to avoid a penalty, as long as you are not more than 30 days behind.²

Exemptions and appeals: where the savings are

Two things depend on you and have deadlines:

• Claim the exemptions. They usually do not apply on their own: you have to file a form with the county office, normally once, and sometimes renew it. In California, for example, the homeowners’ exemption takes $7,000 off the taxable value, is filed once and must be in by February 15 to get the full exemption that year;⁶ in Florida, the application is due by March 1 and the appraiser then mails you a renewal every year.⁷ If you just bought, the primary residence exemption is the first one to check.
• Appeal the assessed valueproperty tax appealA property tax appeal is the formal process to ask that the value the local government gave your property be changed, if you think it is too high or has errors. Each state calls it something different: in Texas it is a protest to the appraisal review board, and in New York it is a grievance with the municipality. Often you can first talk informally with the assessor's office. There are strict deadlines and it is up to you to bring evidence, such as sales of similar homes. The appeal reviews the value, not the tax rate.See the full definitionClose. If the value you were assigned is above what comparable homes sold for, you can ask for a review. It usually starts with an informal request to the county office and, if that fails, a hearing before a board. In Florida, for example, you can ask the appraiser for an informal conference and, if you still disagree, file a petition with the value adjustment board within 25 days after the assessment notice is mailed.⁸ Bring comparable sales, photos and, if you have them, repair estimates.

Two ways to pay less

Lowers the taxable value

Claim an exemption

• You have to apply: in California you file once with the county assessor.⁶
• In California, the homeowners' exemption takes $7,000 off the taxable value and is due by February 15 for the full amount.⁶
• In Florida it is due by March 1, and the appraiser then mails you a renewal every year.⁷

Fixes a value that is too high

Appeal the assessed value

• Useful if the value you were assigned is above what comparable homes sold for.
• In Florida you can ask the appraiser for an informal conference; it is not a required step before the formal review.⁸
• And file a petition with the value adjustment board by the 25th day after the notice is mailed.⁸

Forms and dates change by state and by county: look them up on your state's page.

What part is deductible on your federal return

According to IRS Publication 530 for tax year 2025, you can deduct the property tax if it is assessed uniformly at a like rate on all real property throughout the community and the proceeds are used for general community or governmental purposes. To deduct it you must itemize on Schedule A (if you itemize, you cannot take the standard deduction), and the overall deduction for state and local taxes (income, sales and property) has an annual limit, whose 2025 figure and income phase-downs are in the publication itself.³

Three details that tend to confuse:³

• Assessments for local improvements that increase your property’s value (streets, sidewalks, water and sewer) are not deductible: they are added to the home’s basis. The part that is for maintenance, repair or interest is deductible, if you can show how much it is.
• Homeowners’ associationhomeowners association (HOA)A homeowners association (HOA) is the organization formed in many subdivisions and condominium buildings to manage shared expenses such as landscaping, a pool, maintenance of common areas and, in condos, the roof and exteriors. Each owner pays dues, normally monthly, and must follow its rules, which can cover anything from the color of your door to renting the home out. If you do not pay, the association can add charges and, in several states, place a lien on your home. The dues count toward your monthly payment when lenders judge whether you can afford the mortgage.See the full definitionClose dues are not deductible tax, because the association, not a government, imposes them.
• Taxes on real estate in another country are not deductible.

And two timing rules: if you pay through escrow, you deduct only the taxes the lender actually paid from escrow to the taxing authority, not everything you deposited; and in the year of purchase, the seller is treated as paying up to the day before the sale and the buyer from the date of sale, each with their own share.³

If you cannot pay

The consequences of not paying property tax are set by each state and can go as far as a tax sale of the home, with interest and penalties along the way. If you have escrow, the servicer pays the bill while you are current on the mortgage; the risk appears when there is no escrow or when you fall behind. In that case, ask the county tax collector about payment plans and about exemptions or deferrals for older adults or low incomes, and talk to a HUD-approved housing counselorHUD-approved housing counselorA HUD-approved housing counselor works at an agency HUD has approved to provide housing counseling: independent, expert advice customized to your situation about buying a home, renting, a missed mortgage payment, a foreclosure or credit problems. The agencies usually charge little or nothing; many serve in Spanish and offer the homebuyer education course several assistance programs require. They are not lenders or real estate agents and sell you nothing. Your county page lists the official agencies with phone numbers.See the full definitionClose: they give independent advice on missed payments and credit, often free or at low cost.⁹ If there is already a lien or sale notice, free legal aid comes first. If the problem is the whole mortgage, the If you can’t pay your mortgage guide explains your options.

Costly mistakes

• Mistake: Assuming you will pay the same as the seller.

  Instead: The value can reset when the home changes hands: in Florida, to just value on the following January 1.⁵

• Mistake: Not claiming the primary residence exemption.

  Instead: You have to apply: in California, by February 15 to get the full exemption that year.⁶

• Mistake: Missing the appeal deadline.

  Instead: Write down the date: in Florida, the petition to the board is due by the 25th day after the assessment notice is mailed.⁸

• Mistake: Throwing away the annual escrow statement unread.

  Instead: It explains why your payment changed, and a shortage of a month or more can be repaid over at least 12 months.²

• Mistake: Deducting everything you deposited into escrow.

  Instead: Only what the lender actually paid to the taxing authority is deductible.³

• Mistake: Deducting homeowners' association dues as tax.

  Instead: They are not deductible tax: the association imposes them, not a government.³

If you just bought, the first year as a homeowner guide puts these dates together with the home’s other bills, and the home insurance guide explains the other half of your escrow.

What to do this week

1. Find your home’s most recent tax bill and the assessed value the county assigned.
2. Check on your state’s page which exemptions exist and whether you have already claimed the primary residence one.
3. Read your latest annual escrow statement and confirm what the servicer paid.²
4. Compare the assessed value with recent comparable sales; if it is above, note the appeal deadline.
5. For your federal return, add up only what the lender paid from escrow and ask at a VITA site whether itemizing pays.³