S
SayItPlain

← All plain answers

Property taxes, explained in plain words

THE SHORT VERSION

Property tax is a yearly tax your city and county charge on the value of your home and land. It pays for the local stuff: schools, roads, fire trucks, police, libraries. The amount is your home's assessed value multiplied by your local tax rate. Most homeowners never write the check directly — it is collected monthly inside the mortgage escrow account.

Unlike income tax, which follows your paycheck, property tax follows your address. Own the home, owe the tax — whether the house is paid off or not. The bill belongs to the property, which is why unpaid property taxes can put a lien on the home itself.

How the amount is figured

Two numbers do all the work. First, the local assessor estimates your home's value — the assessed value, which is often close to, but not exactly, what the home would sell for. Second, your local governments set a tax rate. Multiply the two and you get the bill. Rates vary wildly by place: the same house can owe three times more in one town than in another, because the rate is really paying for that town's schools and services.

A REAL EXAMPLE

Your home is assessed at $350,000 and your combined local tax rate is 1.1%. Your yearly bill is $3,850 — about $321 a month sitting inside your mortgage payment. Now apply a homestead exemption, which many states offer on your main home: if it knocks $25,000 off the taxable value, you are taxed on $325,000 instead, and the bill drops to about $3,575. Same house, $275 a year saved, just for filing a form.

Exemptions and appeals

The homestead exemption is the big one, and there are often extra breaks for seniors, veterans, and disabled homeowners. None of them are automatic in most places — you apply, usually once. Separately, if you believe the assessor valued your home too high, you can appeal the value. There is a deadline every year, and comparable sales of similar nearby homes are your best evidence.

Watch out for: your tax bill can jump the year after you buy. The previous owner may have been assessed at a value from years ago, and the sale often triggers a fresh look at the current price. Budget for taxes on what you paid, not on the old owner's bill — and if you pay outside of a mortgage, remember the bill comes once or twice a year, in the thousands, all at once.

Got one of these in your hand right now?

Ask SayItPlain — it talks like a person, and it answers in plain words.

Ask SayItPlain

Tools that help

Plain picks — coming soon. When this section opens, anything here that earns SayItPlain a commission will say so, right on it.