How property tax works
Property tax funds local services — schools, county government, fire districts — and it is set locally, so two similar homes an hour apart can owe very different amounts. The bill comes from a value and a rate, and you have some influence over both.
Last reviewed August 2026
Value times rate
A county assessor assigns your home a taxable, or assessed, value. In some places that is meant to equal market value; in others it is a fixed fraction of it — the assessment ratio — or it is capped so it can only rise a few percent a year regardless of the market. Every overlapping taxing body then applies its rate, and those stack: county plus city plus school district plus any special levies.
Add all of that up, divide by the home's market value, and you get the effective tax rate — the number to compare across places. It ranges from under 0.4% in a few low-tax states to over 2% in parts of the Northeast and Midwest.
Lowering the bill
- Homestead exemption: reduces the taxable value of an owner-occupied primary residence. File it — many owners forget.
- Other exemptions: senior, veteran, and disability exemptions exist in most states and can be substantial.
- Appeal the assessment: if recent comparable sales suggest your assessed value is too high, you can usually appeal within a set window each year.
Terms in this guide
- Assessed value — The value a county assessor assigns to a property for tax purposes, which may lag or trail market value and is often a fixed percentage of it (the assessment ratio). Property tax is the assessed value, minus exemptions, times the combined local rate.
- Effective property tax rate — Annual property tax paid divided by the home's market value, expressed as a percent. It rolls every overlapping levy — county, city, school district, special districts — into one comparable number, and ranges from about 0.3% to over 2% across the U.S.
- Homestead exemption — A reduction in the taxable value of an owner-occupied primary residence, which lowers the property tax bill. The amount and rules vary by state and county; some also cap how fast assessed value can rise.
- Escrow account — An account the loan servicer uses to hold and pay your property taxes and homeowners insurance. You pay one-twelfth of the annual total with each mortgage payment, and the servicer disburses the bills when due. Shortfalls trigger an annual escrow adjustment.