Honestly, nobody gets excited about paying property taxes. I completely understand that. Every quarter when those bills arrive or every month when you see that escrow line item on your mortgage statement, it can feel like money just disappearing into a black hole.
But here's what it means for you as a homeowner. Those tax dollars you're paying? They're actually funding almost every community service you interact with daily. The school bus that picks up your kids, the firefighters who respond when your neighbor's house catches fire, the road crews who fix that pothole you've been dodging for weeks, the library where you take your children for story time. Property taxes make all of that possible.
Think of it like this: property taxes are essentially your membership dues for living in a functioning community. I know that sounds a bit abstract, so let's break down exactly where your money goes and why it matters. In fiscal year 2022, property taxes accounted for a staggering 27.4% of all state and local tax collections across the United States. Even more striking, they make up 70.2% of local tax collections specifically.
According to Tax Foundation data, state and local authorities collected $547 billion in property taxes in 2018, and that number has only grown since. For the average American household, property taxes total about $2,459 annually, though this varies wildly depending on where you live. Some homeowners in states like New Jersey pay over $8,300 per year, while others in Hawaii average just $1,723 despite having much higher home values.
Property taxes rose 4.1% nationally for single-family homes in 2023, according to Maptive's analysis of current trends. This reflects both increasing home values and growing community service needs. Here in Kentucky, I see these increases affecting homeowners across different income levels, which is why understanding exactly where this money goes helps put the cost in perspective.
The reality is that property taxes have real-world impacts on your personal finances, especially in high-tax states. Whether you're buying your first home or you've owned for decades, understanding how property taxes work, what they fund, and why rates differ so dramatically from state to state empowers you to make better housing decisions and budget appropriately.
Just breathe. I know taxes can feel overwhelming, but let's start with the basics. A property tax is exactly what it sounds like: an annual tax levied on residential or commercial property that you own. Your local government determines the rate based on multiple factors, and it varies not just state to state but often county to county and even between zip codes within the same area.
Property taxes are rooted in what economists call the "benefit principle" of taxation. Essentially, the people paying property taxes are generally the ones benefiting most directly from the services those taxes fund. If you own property in a community, you benefit from the schools, roads, police protection, and parks that property taxes support.
Let's look at some real numbers to understand the variation. According to PropertyShark's 2025 rankings, New Jersey homeowners face the highest effective property tax rate in the nation at 2.23% to 2.49%, depending on the specific data source. With the state's median home value of $335,600, this translates to approximately $8,356 in annual property taxes.
On the complete opposite end of the spectrum, Hawaii has the lowest property tax rate at just 0.28%. However, Hawaii's median home value is the highest in the country at $615,300, which means even with that tiny rate, homeowners still pay around $1,723 annually. Alabama comes in second-lowest with a 0.41% rate and a median home value of $147,200, resulting in annual property taxes of just $604, the lowest in the United States.
Illinois holds the second-highest effective rate at 2.27% according to multiple sources. The Motley Fool's analysis using 2024 American Community Survey data shows that with Illinois' median home value of $194,500, property owners pay approximately $4,415 annually. According to NAHB Eye on Housing, Illinois charges $17.93 per $1,000 of home value, while Hawaii charges just $3.08 per $1,000.
These stark differences, sometimes to the tune of thousands of dollars annually for similar home values, often perplex homeowners. Honestly, when I first started researching property taxes, this part confused me too. Why does a $300,000 house in New Jersey cost so much more in property taxes than the same value home in Alabama? Understanding the factors at play helps demystify these variations.
Property tax dollars fund an incredibly diverse range of community services. While specific allocations vary by locality, property taxes generally support what I call the "Nine Pillars of Community Infrastructure." Let's explore each one.
Schools and education
Public education represents the single largest expenditure of property tax revenue in most communities. For over a century, state and local municipalities have relied heavily on property taxes to build schools, maintain facilities, purchase educational materials, and pay teacher salaries.
This funding mechanism has proven invaluable for ensuring educational access, especially in underserved communities. However, it also creates disparities. Wealthy districts with high property values generate more tax revenue per student than poorer districts, even with identical tax rates. This has sparked ongoing national debates about educational equity and funding fairness.
Some states like Indiana and Michigan have begun shifting toward state tax-based funding models rather than relying as heavily on local property taxes. The National Conference of State Legislatures notes that other states like California are exploring limits on property tax growth to address affordability concerns while still maintaining school funding.
The reality is that your property taxes directly impact the quality of schools in your neighborhood. Better-funded schools typically feature smaller class sizes, more extracurricular options, newer facilities and technology, and competitive teacher salaries that attract top educators.
Safety services
When we talk about safety, we mean the front-line workers who keep our communities secure: firefighters, police officers, EMTs, paramedics, and 911 dispatch operators. Property taxes fund not just their salaries, but also their equipment, training, vehicles, stations, and facilities.
Beyond personnel and equipment, property tax revenue also covers legal costs associated with public safety, including payouts for misconduct cases, personal injury lawsuits, and workers' compensation for injured first responders. These costs can be substantial, especially in larger cities.
Think about what happens when you call 911. Within minutes, trained professionals respond with specialized equipment. That rapid response system exists because of consistent property tax funding that maintains staffing levels 24/7, keeps vehicles maintained and fueled, and ensures emergency equipment stays current.
Public parks, playgrounds, nature preserves, community gardens, sports fields, and recreational facilities don't maintain themselves. Property taxes provide essential funding for construction, ongoing maintenance, landscaping, equipment replacement, and programming.
While federal grants, state funding, and private donations also support parks and recreation, property taxes often fill critical gaps. In many communities, property tax levies specifically earmarked for parks and recreation ensure consistent funding that isn't subject to the unpredictability of grant cycles or donation fluctuations.
These spaces provide immeasurable community value: places for children to play safely, venues for community events, facilities for organized sports and recreation, and green spaces that improve mental and physical health. Property taxes make these community assets accessible to everyone, regardless of income.
Roads, bridges, traffic signals, street lights, sidewalks, and bike lanes require substantial investment for both initial construction and ongoing maintenance. While state and federal funding contributes to major highways and interstate systems, local property taxes fund the vast majority of neighborhood streets and local transportation infrastructure.
The American Society of Civil Engineers regularly reports on America's infrastructure needs, noting that local road maintenance backlogs run into billions of dollars. Property taxes provide the steady revenue stream communities need to address these challenges systematically rather than waiting for crises.
Every time you drive to work on smooth, well-maintained roads with functioning traffic lights, or walk safely on maintained sidewalks, you're experiencing the benefits of property tax investment in infrastructure.
Your monthly property tax bill likely includes itemized fees for trash collection, recycling services, street cleaning, and sewer and stormwater management. While sometimes categorized separately from "property taxes" in billing statements, these charges are effectively property taxes since they're levied exclusively on property owners.
Sanitation services extend beyond weekly trash pickup. They include: hazardous waste collection events, yard waste and composting programs, street sweeping and cleaning, catch basin and storm drain maintenance, wastewater treatment, and water quality monitoring.
These services prevent public health crises, protect environmental quality, and maintain community aesthetics. The infrastructure required is extensive and expensive, requiring consistent funding that property taxes provide.
Public libraries have evolved far beyond book lending. Modern libraries serve as community hubs offering internet access, technology training, job search assistance, children's programming, meeting spaces, and educational resources for all ages.
Property taxes fund library operations, staff salaries, book and material purchases, technology infrastructure, building maintenance, and programming. In many communities, dedicated library tax levies ensure consistent funding separate from general municipal budgets.
Libraries provide essential services that level the playing field for community members without home internet access, offer safe spaces for students to study and complete homework, support adult literacy and continuing education, and serve as gathering places that strengthen community bonds.
Depending on your community, property taxes may fund local health departments, mental health and addiction services, senior centers and programming, services for individuals with disabilities, housing assistance programs, food security initiatives, and animal shelters and control services.
These services create safety nets for vulnerable community members and address social issues that affect overall community well-being. In my Master’s of Social Work (MSW) program, we study how these interconnected community systems work together to support population health and resilience.
While federal and state funding often contributes to social services, local property tax revenue frequently fills gaps or matches grant requirements, ensuring services remain accessible even when higher-level funding fluctuates.
Emergency management and disaster preparedness
Property taxes fund emergency planning, disaster preparedness, early warning systems, emergency operations centers, backup communication systems, and recovery resources. These expenses may not be visible daily, but they prove critical during natural disasters, disease outbreaks, or other emergencies.
Communities invest property tax dollars in planning for scenarios they hope never occur, but experience teaches that preparation saves lives and reduces recovery costs when disasters strike.
Administrative and governance costs
Property taxes also fund the basic governmental operations that keep communities functioning: city or county administration, tax assessment and collection, planning and zoning departments, building inspection and code enforcement, and elected official salaries and benefits.
While less visible than schools or police, these administrative functions ensure communities can actually deliver services, enforce regulations that protect property values, and make informed decisions about future development and needs.
Now that you understand where your tax dollars go, let's explore how the property tax system actually functions. This knowledge helps you understand your bill, anticipate changes, and budget appropriately.
Property tax due dates vary by state and even by county within states. There's no national standard, which can catch people off guard when they move to a new area.
In most jurisdictions, property taxes are due annually or semi-annually. Some common payment schedules include: annual payment in late fall or early winter, semi-annual payments in spring and fall, quarterly payments throughout the year, or monthly payments through mortgage escrow.
If you live in Illinois, for example, most counties set due dates for June 1st and September 1st. California typically bills in two installments, with first installment due November 1st and second installment due February 1st. Texas bills annually in October with payment typically due by January 31st.
When bills arrive late due to government processing delays, adjusted deadlines typically give taxpayers 30 days from the bill date to pay without penalty. If you're uncertain about your specific due dates, contact your county tax assessor or collector's office for clarification.
Are property taxes included in mortgage payments?
This question confuses many homeowners. The answer depends on your loan type, down payment, and lender requirements.
FHA loans, VA loans with less than 10% down, and conventional loans with less than 20% down almost always require property taxes to be escrowed. This means your lender collects property tax money as part of your monthly mortgage payment and holds it in an escrow account. When property taxes come due, the lender pays them directly to the tax collector on your behalf.
Borrowers using AmeriSave's FHA loan programs automatically have property taxes included in monthly mortgage payments, simplifying budgeting and ensuring taxes get paid on time without separate reminders. The escrow account prevents missed payments that could result in tax liens against your property.
Here's how escrow works in practice. Let's say your annual property taxes are $4,800. Your lender divides this by 12, adds $400 monthly to your regular mortgage payment, and deposits that amount into your escrow account. When the tax bill arrives, your lender pays it directly from the escrowed funds.
Lenders often collect a cushion, typically requiring an extra two months' worth of taxes in the account at all times. This protects against tax increases or calculation errors. If you overpay and the cushion grows too large, your lender must refund the excess or reduce future payments. If you underpay and taxes increase more than anticipated, you'll need to make up the shortfall, usually through increased monthly payments going forward.
Even when property taxes are escrowed, you remain ultimately responsible. Review your annual escrow analysis statement carefully and verify that tax payments were made on time by checking for reciepts from your county tax collector. If payments weren't made, contact both your lender and tax authority immediately to resolve the issue.
Property tax costs depend on your location, home value, and local tax rates. The variation across the country is truly staggering.
According to PropertyShark's 2025 analysis, the highest property tax states are: New Jersey at 2.23% to 2.49% effective rate with $8,356 average annual bill, Illinois at 2.07% to 2.27% with $4,415 average, Connecticut at 2.14% with $5,894 average, New Hampshire at 2.18% with $5,705 average, and Vermont at 1.90%.
The lowest property tax states are: Hawaii at 0.28% with $1,723 average, Alabama at 0.38% to 0.41% with $604 average, Louisiana at 0.55% with modest bills despite low home values, Delaware at 0.57%, and South Carolina at 0.57%.
Homeowners in Paterson, New Jersey pay a median 9.8% of their household income toward property taxes, the highest ratio in SmartAsset's 2025 study of 343 U.S. cities. That's nearly $9,800 annually on a median income of around $99,000. Meanwhile, homeowners in Montgomery, Alabama pay just 1.1% of income, roughly $917 annually.
The disparity is mind-boggling. A $400,000 home in Alabama would cost around $1,640 in property taxes annually. That same $400,000 home in New Jersey would cost nearly $10,000 annually, more than six times as much.
When budgeting for homeownership, don't just consider the mortgage payment. Use AmeriSave's mortgage calculator to understand your complete monthly housing cost, including estimated property taxes for your area. This gives you a realistic picture of affordability before you start house hunting.
The variation in property tax rates stems from complex interactions between home values, local service needs, state tax structures, and policy decisions. Let's break down the key factors.
Average home values and assessed values
Property taxes are calculated based on assessed value, not market value. The relationship between these two numbers varies significantly by jurisdiction (or is it separate... I always mix these up).
Some states assess properties at 100% of market value. Others use much lower percentages: 10% of market value in some California jurisdictions, 25% of market value in certain Arizona areas, or variable percentages that change annually in states like Michigan.
Wealthy communities with high average home values generate substantial tax revenue even with relatively low tax rates. A wealthy suburb with median home value of $800,000 and a 1% effective tax rate generates $8,000 per property annually. A working-class community with median home value of $150,000 needs a 5.33% rate to generate that same $8,000 per property.
This creates challenging dynamics. Higher-income communities can afford better services with lower rates, while lower-income communities must impose higher rates to achieve adequate service levels, which can depress property values and economic development.
States without income taxes like Texas, New Hampshire, and Florida often rely more heavily on property taxes to fund government services. Texas's relatively high property taxes compensate for the absence of state income tax.
Similarly, states with low sales taxes may impose higher property taxes to maintain revenue balance. The Tax Foundation notes that communities must fund services somehow, and property taxes provide stable, predictable revenue that doesn't fluctuate as dramatically as income or sales taxes during economic downturns.
In states with high property taxes combined with high income and sales taxes, like New Jersey and Illinois, the overall tax burden can be substantial. These states often face political pressure to reform tax structures, though change comes slowly due to competing interests and budget constraints.
Property tax rates reflect community priorities and service needs. Districts with aging infrastructure require more revenue for repairs and upgrades. Communities experiencing rapid growth need funding for new schools, expanded police and fire services, and infrastructure to support development.
School funding needs particularly drive property tax rates. Districts in states where the state government provides generous per-pupil funding can maintain lower local property tax rates. Districts in states with minimal state education funding must rely almost entirely on local property taxes, resulting in higher rates.
The strength of a community's commercial and industrial tax base significantly impacts residential property tax rates. Commercial properties typically pay property taxes at different rates than residential properties, often higher.
Cities with robust downtown business districts, shopping centers, or industrial parks can generate substantial revenue from commercial property taxes, reducing the burden on residential property owners. Bedroom communities with primarily residential development must fund services almost entirely through residential property taxes.
Communities with strong tourist economies can offset property taxes through hotel taxes, restaurant taxes, sales taxes paid by visitors, and admission fees for attractions. This phenomenon explains why some tourist-heavy areas maintain lower residential property tax rates despite providing extensive services.
Florida leverages tourism revenue extensively, helping keep residential property tax rates more moderate than they might otherwise be given the state's lack of income tax. Resort communities in other states employ similar strategies.
Some states reassess property values annually, ensuring tax revenue keeps pace with market changes. Others reassess only when properties change hands or undergo major renovations, creating situations where neighbors in identical homes might pay vastly different property taxes based solely on purchase timing.
Rate caps limit how much property taxes can increase annually regardless of rising property values. These caps protect homeowners from sudden dramatic increases but can also constrain local government revenue and force service cuts during periods of rapid property value appreciation.
California's Proposition 13, passed in 1978, famously limited property tax increases to 2% annually unless property changed hands. This protects long-time homeowners but creates inequities between new and established residents and constrains local revenue growth.
Let's walk through exactly how property taxes are calculated using a realistic example. This removes the mystery and helps you verify your own tax bill's accuracy.
Imagine you purchase a home with a market value of $350,000 in a jurisdiction with a 100% assessment ratio and a mill rate of 18.5. Here's the calculation:
First, determine assessed value. With a 100% assessment ratio, assessed value equals market value, so $350,000.
Second, apply the mill rate. Remember, a mill rate represents dollars per thousand of assessed value. So 18.5 mills means $18.50 per thousand dollars of assessed value.
Third, calculate annual property taxes. Take assessed value of $350,000, divide by $1,000 to get 350, multiply by the mill rate of $18.50, equals $6,475 annual property taxes.
Fourth, calculate monthly escrow payment. Divide annual taxes of $6,475 by 12 months equals approximately $540 per month for property taxes alone.
Now let's consider a different scenario in a state with a lower assessment ratio. Same $350,000 market value home, but assessed at only 80% of market value with a higher mill rate of 22.
Assessed value equals $350,000 times 80% equals $280,000. Apply mill rate of 22 mills ($22 per thousand) equals $280 times $22 equals $6,160 annual property taxes. Monthly escrow equals approximately $513.
Notice that different combinations of assessment ratios and mill rates can produce similar actual tax bills. This is why comparing mill rates between states or even counties isn't particularly useful without also knowing assessment ratios.
Exemptions and adjustments
Many homeowners qualify for exemptions that reduce their taxable assessed value. Common exemptions include:
Homestead exemptions for owner-occupied primary residences, often reducing assessed value by a fixed amount, like $25,000 to $50,000. Senior citizen exemptions for homeowners above a certain age, typically 65, providing additional assessed value reductions or tax freezes. Veteran exemptions for qualifying military veterans, especially those with service-connected disabilities. Disability exemptions for homeowners with permanent disabilities. Agricultural exemptions for working farms and ranches.
Let's apply an exemption to our earlier example. $350,000 market value with a $50,000 homestead exemption reduces assessed value to $300,000. With our 18.5 mill rate, taxes would be 300 times $18.50 equals $5,550 annually instead of $6,475, a savings of $925 per year.
These exemptions make a real difference in affordability. If you qualify for any exemptions, make sure you're actually receiving them by carefully reviewing your property tax bill and assessment notice. Contact your county assessor's office to apply if you're eligible but not currently receiving exemptions.
Here's something many homeowners don't fully consider: improving your home increases its value, which increases your property taxes. Any renovation or remodeling project that adds value will eventually result in a higher assessed value and higher property taxes after reassessment occurs.
Major renovations that typically trigger reassessment include: adding square footage through additions, finishing previously unfinished spaces like basements or attics, adding bathrooms or bedrooms, major kitchen or bathroom remodels, adding swimming pools or substantial outdoor living spaces, and installing solar panels or other major systems.
The reassessment might happen automatically when you pull building permits for the work. Permit applications often trigger assessor visits to evaluate the improvements and adjust assessed value accordingly. In some jurisdictions, reassessment occurs during the next scheduled assessment cycle, which could be years after the work completes.
This creates an interesting dynamic. You're spending money to improve your home, increasing its value and your enjoyment of it, but you'll pay higher property taxes for the privilege. For most homeowners, the benefits outweigh the increased tax costs, but it's worth factoring into renovation budgeting.
If you're contemplating major home improvements and concerned about property tax impacts, AmeriSave's home equity line of credit can provide flexible funding for projects while allowing you to deduct interest payments on your federal taxes within applicable limits. This can help offset some of the increased property tax burden from improvements.
Property taxes and your financial planning
Property taxes deserve careful consideration in your broader financial planning. They impact affordability, cash flow, and long-term wealth building.
When determining how much house you can afford, factor in property taxes alongside the mortgage payment, insurance, and maintenance costs. A general rule suggests limiting total housing expenses to 28% of gross monthly income. Use AmeriSave's home affordability calculator to understand your buying power while accounting for estimated property taxes in your target area.
If you're considering relocating to a different state, research property tax differences carefully. A seemingly expensive high-tax state might actually be more affordable when considering income tax and sales tax differences. Conversely, a low property tax state with high income taxes might cost more overall depending on your income level.
For retirees on fixed incomes, high property taxes can strain budgets significantly. Some retirees relocate from high-tax states like New Jersey or Illinois to low-tax states like Alabama or South Carolina specifically to reduce their property tax burden. However, this decision should consider all factors including access to healthcare, proximity to family, cost of living, and state tax treatment of retirement income.
Rising property taxes can sometimes make refinancing worthwhile if it lowers your overall monthly housing payment enough to offset the increased property tax portion. AmeriSave's refinance options help homeowners reduce interest rates or shorten loan terms, potentially freeing up cash flow to manage higher property tax bills.
Property taxes represent a substantial annual expense for homeowners, ranging from under $1,000 to over $10,000 depending on location and home value. These taxes fund critical community services that we rely on daily: schools, police and fire protection, roads and infrastructure, parks and recreation, libraries, sanitation, and social services.
While nobody enjoys paying taxes, property taxes follow the benefit principle: those paying generally benefit most directly from the services funded. This direct connection between payment and benefit distinguishes property taxes from other tax types.
Understanding how property taxes are calculated, when they're due, how they're included in mortgage payments, and why rates vary so dramatically between locations empowers you to make informed home buying and financial planning decisions.
Property taxes will likely continue increasing over time as property values appreciate, service costs rise, and communities face infrastructure maintenance backlogs. Budgeting for gradual increases prevents financial strain and keeps homeownership affordable long-term.
Here's what this means for you as a prospective home buyer or current homeowner: property taxes deserve serious attention in your housing decisions and financial planning. They're not just another line item in your budget, they're a significant ongoing cost that varies more than almost any other aspect of homeownership depending on location.
Think of property taxes as an investment in your community's future. Well-funded schools increase property values and attract families. Safe, well-maintained neighborhoods with good infrastructure retain and grow value over time. Parks and libraries enrich quality of life for everyone.
When evaluating homes in different areas, don't focus solely on purchase price and mortgage payments. Calculate total monthly housing costs including property taxes to understand true affordability. A $300,000 house in a high-tax state might cost more monthly than a $350,000 house in a low-tax state.
Before purchasing, research: the effective property tax rate in your target area, recent assessment and taxation trends in the jurisdiction, available exemptions you might qualify for, and whether property tax rates have been stable or increasing rapidly.
Use AmeriSave's prequalification tool to understand how much home you can realistically afford after accounting for property taxes and other housing costs in your desired location. Getting prequalified provides clarity about your buying power and shows sellers you're a serious buyer prepared to move quickly on the right property.
If you're struggling with higher property tax bills in your current home, consider your options. For homeowners with significant equity, a cash-out refinance can provide funds to pay off high-interest debt or make home improvements, potentially improving your overall financial situation even if property taxes are rising.
Property taxes aren't going anywhere. They're a permanent feature of homeownership that funds the community infrastructure we all depend on. Understanding them, planning for them, and factoring them appropriately into your housing decisions ensures property taxes enhance rather than undermine your path to building wealth through homeownership.
Your local tax assessor will find out how much your new home is worth, and your local government will set the mill rate. These two things will decide how much you owe in property taxes. The assessed value is usually a percentage of the purchase price, but this percentage can be anywhere from 10% to 100% of the market value, depending on the state. The mill rate is the amount of money you owe for every thousand dollars of assessed value. Your local government uses this to figure out how much you owe in taxes each year. You would pay $5,000 a year in property taxes if your home is worth $250,000 and the local mill rate is 20. When properties change hands, a lot of places reevaluate them. Even if local rates haven't changed, this means that your tax bill could be different from what the last owner paid. To avoid big jumps in taxes right after a purchase, some states slowly raise property taxes. Ask the seller or your real estate agent for a property tax history to see how the home's taxes have changed in the past few years. Next, call your county's assessor's office to make sure you know the current assessment method and mill rate that will apply to your purchase.
Yes, property taxes can and often do go up after you buy a home. Sometimes they go up a lot. There are a number of reasons why rates go up. For example, annual reassessments that show property values going up, voter-approved mill rate or levy increases to pay for certain projects or services, adjustments to rates across the board to meet budget needs, improvements you make that add value to your property, and inflation-adjusted assessment increases even if your home's value stays the same. Many states limit how much property taxes can go up each year to keep homeowners from having to pay a lot more all at once. These limits are usually between 2% and 5% each year. But these limits reset when properties change hands. This means that if the previous owner's taxes were artificially low because they owned the property for a long time under a capped system, your taxes could go up a lot when you buy it. Read your annual assessment notice carefully every year to find out why your taxes went up and to make sure the assessed value is correct. Most places let you contest the assessment if you think your property is worth more than what it was assessed at. You can do this by showing proof, like recent sales of similar properties or professional appraisals that show your property is worth less than what it was assessed at. When making plans for the long-term costs of owning a home, don't forget to factor in property taxes that go up over time. If you think taxes will stay the same, you might have money problems when they do go up.
If you don't pay your property taxes, things will get worse and worse until you lose your home. The order of events is always the same, but the exact steps and timeline vary from state to state. At first, you'll get notices that your payments are late and you'll start to owe interest and penalties on the money you owe. These fees usually start at 1% to 1.5% a month. The tax authority will put a tax lien on your property if you don't pay your taxes for a few months. This will be on public record and hurt your credit score a lot. Tax liens are more important than most other debts, even your mortgage. This means that if you sell your property, the tax authority gets paid first, and then your mortgage lender. The government can take your property if you don't pay your taxes and sell it at auction to get back the taxes you owe, plus interest and penalties. This is known as tax foreclosure. Some states sell tax lien certificates to investors who pay your overdue taxes and then charge you interest on the money they lent you. They could take your property if you don't pay them back. The whole process, from the first missed payment to the actual loss of property, usually takes one to three years. This depends on the laws in your state and the number of properties that are behind on their payments. If you can't pay your property taxes, call your tax collector's office right away to find out about payment plans or programs that can help people who are having trouble. A lot of places would rather work with homeowners to slowly collect taxes than start the process of taking their homes. Don't ignore it. If you act quickly, you have more choices and the situation won't get worse, which could mean losing property.
You can usually take the property taxes you pay on your main home and other real estate you own off of your federal income tax return. But because of recent changes to tax law, this benefit is now much less available to many homeowners. The Tax Cuts and Jobs Act of 2017 says that married couples who file together can only deduct up to $10,000 in state and local taxes, like property taxes. They can only deduct up to $5,000 if they file separately. This $10,000 limit covers all property taxes and state and local income taxes. This means that people who live in states with high taxes and have high incomes often go over this limit and can't deduct all of their property tax payments. To get the property tax deduction, you need to list your deductions on Schedule A instead of taking the standard deduction. This is $29,200 for married couples who file taxes together in 2025. The standard deduction is better for many people who pay taxes than itemizing, so the property tax deduction doesn't help them. You can deduct property taxes paid through mortgage escrow in the year your lender actually pays them to the tax authority, not when you put money into escrow. Your mortgage lender should send you Form 1098, which shows the property taxes they paid for you during the tax year. You can write off all of your property taxes as business expenses on Schedule E for investment or rental properties without going over the $10,000 SALT limit. Talk to a tax expert to find out if itemizing and deducting property taxes is better for you or if the standard deduction will save you more money.
Most of the time, seniors have to pay property taxes like everyone else. However, many states have special rules that make it easier for seniors to pay their property taxes, such as exemptions, deferrals, or freezes. These benefits are very different from state to state and even from county to county or city to city within a state. Some common property tax breaks for seniors are homestead exemptions, which lower the assessed value by a set amount for seniors over 65; property tax freezes, which keep your tax bill at its current level as long as you stay in the home; circuit breaker programs, which limit property taxes to a percentage of income and have the state pay any extra; property tax deferrals, which let seniors put off paying property taxes until the home is sold or the owner dies, with the state then collecting from the estate; and exemptions, which completely remove property taxes for seniors with incomes below certain levels. To show that it is your primary residence, you usually have to be at least 62 to 65 years old, have a certain amount of income (which varies from program to program), have owned the home for a certain amount of time in some states, and live there full-time. Some programs make you reapply and show your income every year, while others give you help for life after you first qualify. For example, Florida gives homeowners over 65 who meet certain income requirements more homestead exemptions. Seniors in Illinois can get a homestead exemption that lowers the assessed value of their home in Cook County and a lot of other counties. Proposition 13 in California protects more than just seniors. It also helps long-time homeowners, many of whom are seniors, by keeping taxes from going up too much. Call your county assessor's office to find out about property tax relief programs for seniors in your area. They can tell you what you need to do and when you need to do it.
Property taxes have a big impact on how much a home costs, both when you buy it and while you own it. A lot of the time, this is more than buyers expect. When lenders figure out how much mortgage you can get and your debt-to-income ratio, they also think about your property taxes. This means that if you have to pay a lot of property taxes, you can't buy as much. For example, a person who can pay $2,000 a month for housing in a state with low property taxes might be able to buy a $400,000 home. But if the buyer lives in a state with high property taxes, they might only be able to buy a $300,000 home because the taxes take up more of their monthly payment. Along with the initial qualification, property taxes that must be paid on a regular basis affect how much money you have each month and how flexible your finances are while you own a home. If a homeowner pays $8,000 in property taxes each year, they spend $667 a month on taxes. In a state with low taxes, the same homeowner only pays $1,200 a year, which is $100 a month. You could also use this $567 difference each month to save for retirement, build up an emergency fund, or spend more. Property taxes don't stay the same, so when figuring out how much you can afford, you need to think about how they will go up over time as assessed values go up and rates change in different areas. When property taxes go up a lot, people on fixed incomes, like retirees, have to decide whether to stay in homes they can still afford. Don't just look at mortgage payments when you want to know how affordable housing is in different states or areas. Instead, look at the total monthly cost of housing, which includes the mortgage payment, interest, insurance, and property taxes. If you want to know how much you can really afford to buy, use AmeriSave's affordability calculator. It will give you an estimate of how much property tax you will have to pay in your target area. If you forget about this big ongoing cost, it will help you stay on budget.
The official property tax assessment by your local government tax assessor determines the assessed value of your property, which is then used to figure out how much you owe in property taxes. The assessment's goal is to figure out the fair market value of your property or a percentage of the market value, depending on how your area does things. Assessors look at a lot of things, like the most recent sales prices of homes like yours in your area, the size, age, condition, and features of your home, changes in the local market and prices, improvements you've made since the last assessment, and the development and amenities in your neighborhood. How often assessments happen varies a lot from state to state and even from jurisdiction to jurisdiction. Some areas check again every year to keep up with changes in the market, while others do so every few years on a rotating basis. Some places only reassess when properties are sold or major renovations are done. A few states only do this when ownership changes or improvements are made. For example, Proposition 13 says that California only reassesses when a property is sold or major construction is done. But in some states, all properties must be reassessed every year. When you get an assessment notice, read it carefully to make sure that the property details are correct, the comparable sales used to figure out the value are fair, and that any exemptions you qualify for are applied correctly. Most places let you appeal your assessment if you think it's too high. You usually have 30 to 60 days from the date you got the notice to do this. To win an appeal, you have to prove that the value of your property as determined by the assessment is higher than what it would sell for on the open market. You can usually do this by showing recent sales of similar properties, professional appraisals, or proof of property flaws or damage that the assessment didn't show. It can help you get ready for tax changes and do something when they seem unfair if you know how and when your assessments will happen.
If you have real proof that your property tax assessment is higher than the market value of your property, you can and should appeal it. But the process for appeals is different in each area, and each one has its own deadlines and paperwork needs. Most successful appeals show that the property was overvalued by using one or more of the following methods: recent comparable sales showing that similar properties sold for less than your assessed value, professional appraisals providing independent evidence of the property's value, documentation of defects, damage, or negative factors that weren't included in the assessment, evidence that your property was assessed using incorrect characteristics like overstated square footage or features you don't actually have, or showing that your assessment increased disproportionately compared to similar properties in your neighborhood. You get your assessment notice, which tells you how to appeal and when to do it. This is usually how the appeals process works. You have 30 to 60 days after that to collect proof for your case. Then, you send in all the paperwork to your county board of review or appeals board to formally appeal. You then go to an informal review or hearing to make your case. If they find that your assessment was too low, they may uphold it, lower it, or even raise it. You need to act quickly to have a successful appeal because if you miss a deadline, you lose your right to appeal. You also need to give proof of value instead of just your opinion, compare your property to properties that are very similar in size, condition, and location, and know that general complaints about high taxes won't work because appeals are about the accuracy of the assessment, not the tax rates. If the first level of appeal doesn't work, most places have more than one. For instance, state-level assessment boards or even court appeals for properties that are way too high in value. You might want to hire a property tax consultant or lawyer if you have a lot of money or your property taxes are very different from what they should be. They know how to deal with local assessments and appeals. Even if your appeals only work part of the time, they can still save you hundreds or thousands of dollars a year in property taxes. It's worth the time and effort if you have strong proof of over-assessment.
Condos and townhomes, like single-family homes, have to pay property taxes. But the way taxes are calculated and paid is a little different, which can be hard for many condo and townhome owners to understand. If you own a condo or townhouse, you only have to pay property taxes on your own unit and your fair share of the common areas. You don't have to pay taxes on the whole building or complex. The tax assessor looks at how much similar units have sold for in your complex and in other similar properties, as well as your unit's size, floor level, condition, and other things that were true at the time of the assessment. Your individual assessment usually includes your fair share of shared spaces like the grounds, hallways, lobbies, and amenities. This is based on how much of the total ownership your unit is. This is usually based on how big your unit is compared to the rest of the building or the percentage of the building that your unit is. Most of the time, you get a separate property tax bill for your unit, and you have to pay it directly or through your mortgage escrow, not through your HOA or condo association dues. The association pays one tax bill for the whole property in some countries. But in some places, the whole condo complex is seen as one property, and the association charges the owners through condo fees. Find out what method your area uses to avoid surprises. Your property taxes are not the same as your condo or homeowners association fees. They usually pay for things like maintenance, insurance, amenities, and sometimes utilities, but not the taxes on the property itself. When you make a budget to buy a condo or townhome, be sure to include your property taxes and association fees. In addition to your mortgage payment, these two things make up your total ongoing housing costs. If your condo or townhome is in a complex with a lot of amenities, like pools, fitness centers, and big common areas, its property taxes may be higher than those of a similar single-family home. This is because these features make your property worth more on paper. Using AmeriSave's home affordability calculator, buyers can find out how much their monthly costs will be, including property taxes, association fees, insurance, and mortgage payments, before they buy a condo or townhome.
Even if you have a mortgage, you will still have to pay property taxes as long as you own the property. This is because property taxes are based on who owns the property, not how much money is owed on the mortgage. Many new homeowners are shocked to learn that property taxes are a separate bill that they have to pay every month. You don't have to make monthly payments to your lender anymore when you pay off your mortgage. You also don't have an escrow account where your tax money was kept and collected for you. Instead, you have to pay your property taxes directly to your tax collector, which is usually once a year or every six months, depending on how your area bills. You should plan ahead for when you stop paying property taxes through escrow and start paying them directly. You won't have to pay a small amount every month as part of your mortgage payment. Instead, you'll have to pay a large amount once or twice a year, which could be thousands of dollars at once. A lot of people who pay off their mortgages set up automatic monthly transfers to a special savings account just for property taxes. This is similar to the escrow system they're used to, and it keeps them from being surprised by a large tax bill every year. You can pay your property taxes once a month or once every three months in some places, even if you don't have a mortgage. This makes it easier to plan your money and lessens the stress of having to pay a lot of money all at once. Your property tax bills will go to your home address instead of to the company that handles your mortgage. Check your mail regularly and write down when payments are due on your calendar to avoid late fees. If you don't pay your property taxes after your mortgage is paid off, you could end up with tax liens, fines, interest, and eventually tax foreclosure proceedings that could cost you your home, even though you own it free and clear. Set reminders in your calendar 60 days before taxes are due so you always pay on time. People who are close to paying off their mortgage should get ready for the switch to paying property taxes directly. They should find ways to save enough money and make their payments on time without the structure and automation that mortgage escrow gave them.
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