Property Tax: Assessments, Rates & How to Appeal
Understand how property taxes are calculated, what drives rate differences across locations, and how to challenge your assessment if it seems too high.
Property tax is a tax levied by local governments on real estate and, in some jurisdictions, personal property such as vehicles, boats, and business equipment. It is the primary funding source for local services including public schools, police and fire departments, road maintenance, parks, and local government operations. Property taxes are among the oldest and most stable forms of taxation in the United States.
Unlike federal and state income taxes, property taxes are administered at the local level by counties, municipalities, and special districts such as school boards. This means rates, assessment methods, and exemptions vary enormously from one jurisdiction to another. Effective property tax rates in 2025 range from as low as 0.29% in Hawaii to over 2.2% in New Jersey, meaning the same home could face vastly different tax bills depending on its location.
Property tax bills are based on two factors: the assessed value of your property and the local tax rate (often expressed in mills, where one mill equals $1 per $1,000 of assessed value). Assessments are typically conducted by a local assessor and may be updated annually or on a multi-year cycle. Understanding your assessment and the appeals process can save you significant money over time.
How It Works
Your property tax is calculated by multiplying your property assessed value by the local tax rate. The assessed value may be the full market value or a fraction of it, depending on your jurisdiction. For example, if your home has a market value of $400,000, your jurisdiction assesses at 80% of market value, and the tax rate is 2%, your tax would be: $400,000 x 0.80 x 0.02 = $6,400 per year.
Local assessors determine property values using comparable sales data, income potential (for commercial properties), and replacement cost approaches. Reassessments happen on varying schedules: some jurisdictions reassess annually, while others do so every 3-5 years or only upon sale or improvement. Between reassessments, values may be adjusted using trending factors based on local market conditions.
Property tax bills typically include multiple tax levies from different taxing authorities: the county, city or town, school district, and various special districts. Each authority sets its own rate, and they are combined on your tax bill. Payment schedules vary by location, with most jurisdictions requiring semi-annual or quarterly payments. Many homeowners pay property taxes through an escrow account managed by their mortgage lender.
Current Rates
| Bracket / Category | Rate | Applies To |
|---|---|---|
| Lowest Effective Rates | 0.29% - 0.50% | HI (0.29%), AL (0.40%), CO (0.49%) |
| Below Average Rates | 0.50% - 0.80% | SC (0.53%), WV (0.57%), LA (0.56%) |
| National Average | ~1.1% | Average effective property tax rate across all states |
| Above Average Rates | 1.2% - 1.8% | TX (1.68%), WI (1.61%), CT (1.79%) |
| Highest Effective Rates | 1.8% - 2.3% | NJ (2.23%), IL (2.07%), NH (1.86%) |
Key Forms
Annual notice of your property assessed value from the local assessor
Local form to challenge your property tax assessment (varies by jurisdiction)
Apply for homestead, senior, veteran, or other property tax exemptions
Claim property tax deduction on federal return (itemized deductions, subject to SALT cap)
Deductions & Credits
Federal Property Tax Deduction
Property taxes are deductible as an itemized deduction on Schedule A, subject to the $10,000 SALT deduction cap (combined with state/local income or sales tax).
Homestead Exemption
Most states offer a homestead exemption that reduces the taxable value of your primary residence, ranging from a few thousand to over $100,000 in states like Texas and Florida.
Senior Citizen Exemption
Many jurisdictions offer additional property tax exemptions or freezes for homeowners over age 65, often with income qualification requirements.
Veteran Exemption
Most states provide property tax exemptions for veterans, with enhanced benefits for disabled veterans that can reduce or eliminate property taxes entirely.
Circuit Breaker Credits
Some states offer property tax credits when the tax exceeds a certain percentage of the homeowner income, providing relief to those with high taxes relative to ability to pay.
Filing Tips
- Review your property tax assessment notice carefully each year and compare it against recent comparable sales in your neighborhood.
- File an appeal promptly if your assessment seems too high, as deadlines are strict and typically 30-90 days from the notice date.
- Apply for all exemptions you qualify for, including homestead, senior, veteran, and disability exemptions, as they do not apply automatically in most jurisdictions.
- Consider hiring a property tax consultant or attorney for appeals on high-value properties, as they typically work on contingency.
- Keep records of any property conditions that negatively affect value (structural issues, environmental contamination, easements) to support an appeal.
- If you use an escrow account, verify that your lender is paying the correct amount and review annual escrow analysis statements.
Frequently Asked Questions
How is my property tax assessment determined?
Can I appeal my property tax assessment?
Do property taxes go up every year?
Are property taxes deductible on my federal return?
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