The Basic Formula
Property Tax = Assessed Value × Local Tax Rate (Mill Rate)
Assessed value is determined by your local tax assessor's office and may differ from market value — some jurisdictions assess at 100% of market value, while others use a lower percentage. The tax rate (often expressed as a "mill rate," where 1 mill = $1 per $1,000 of assessed value) is set by local governments to fund schools, infrastructure, emergency services, and other public services.
Why Property Taxes Vary So Much by Location
Property tax rates and assessment practices are set at the state and local level, creating enormous variation across the country — some states have effective property tax rates several times higher than others. Even within the same state, rates vary by county, city, and school district, since local budget needs and property values differ significantly.
How Reassessment Works
Most jurisdictions reassess property values periodically (annually, every few years, or triggered by a sale/major renovation, depending on local rules). Rising home values in your area can increase your assessed value — and therefore your tax bill — even if the tax rate itself stays flat.
Common Property Tax Exemptions
- Homestead exemption — reduces taxable value for a primary residence in many states.
- Senior citizen exemptions — additional reductions in many jurisdictions for qualifying older homeowners.
- Veteran exemptions — available in many states for qualifying veterans.
- Disability exemptions — available in some jurisdictions.
Exemptions vary significantly by state and locality — check with your local assessor's office to see what you might qualify for, since these are often not applied automatically.
Can You Challenge Your Assessment?
Yes — most jurisdictions have a formal appeal process if you believe your assessed value is inaccurate (for example, significantly higher than comparable homes in your area). This typically involves providing evidence like recent comparable sales or an independent appraisal within a specific filing window after receiving your assessment notice.
Budgeting for Property Taxes
If your mortgage includes an escrow account, your lender collects a portion of your estimated annual property tax with each monthly payment and pays the bill on your behalf — meaning a reassessment can increase your monthly mortgage payment even with a fixed interest rate. Use a Property Tax Calculator to estimate your specific bill.