Real estate tax is an annual tax on the value of land and buildings you own

Real estate tax — also called property tax — is a yearly bill you receive from your local government based on what your home or land is worth. It is not the same as federal estate tax, which applies only to very large inheritances. Property tax is a local tax that funds schools, roads, fire departments, and other services in your county or municipality.

The amount you owe depends on three things: the assessed value of your property, the tax rate set by your local government, and any exemptions you may may have access to for. Your county assessor determines the assessed value, which is often lower than the market price you paid. The tax rate varies widely by location — a home worth $300,000 might owe $3,000 per year in one county and $6,000 in another.

Property tax bills arrive once or twice per year, depending on where you live. If you have a mortgage, your lender usually collects the tax as part of your monthly payment and pays it on your behalf. If you own the property outright, you pay the tax directly to your county or municipality.

Key Takeaways

  • Property tax is calculated by multiplying your property's assessed value by your local tax rate, and the bill arrives annually or semi-annually from your county assessor's office.
  • The assessed value is set by your county assessor and is often lower than the price you paid for the property.
  • Tax rates vary significantly by location, so two identical homes in different counties can have very different annual tax bills.
  • If you have a mortgage, your lender collects property tax from your monthly payment; if you own the property outright, you pay the tax directly to your local government.
  • You can challenge your assessed value if you believe it is too high, and you may may have access to for exemptions based on age, disability, military service, or homestead status.

How your assessed value is determined

Your county assessor's office assigns an assessed value to your property, usually every one to three years. This value is not the same as what you paid for the house or what it would sell for today. Assessors use several methods: they may compare your home to similar homes that recently sold in your area, look at the cost to rebuild it, or use income data if the property is a rental.

The assessed value is typically a percentage of the market value — often 50 to 100 percent, depending on your state's rules. Some states cap how much the assessed value can increase each year, even if the market value rises sharply. You can request a copy of your property record from the assessor's office to see what information they used and whether there are errors, such as an incorrect square footage or an extra bedroom that does not exist.

Understanding your local tax rate

Your local tax rate is set by your county, city, or school district — sometimes all three contribute. The rate is expressed as a percentage of assessed value or as a dollar amount per $1,000 of assessed value. For example, a rate of 1.2 percent on a $300,000 assessed value would mean a tax bill of $3,600 per year.

Tax rates change annually based on local government budgets. If your city needs more money for schools or infrastructure, the rate may go up. Conversely, if property values in your area rise significantly, the rate may stay the same or decrease because the total tax revenue stays stable even though each property's bill may change. You can find your local tax rate on your property tax bill or by contacting your county assessor or tax collector's office.

Exemptions that can lower your bill

Many states and counties offer exemptions that reduce your assessed value or tax bill. The most common is the homestead exemption, which lowers the assessed value for your primary residence. Other exemptions exist for seniors, disabled homeowners, veterans, and surviving spouses of military members. Some states also exempt agricultural land or property used for religious purposes.

To claim an exemption, you typically file a form with your county assessor's office by a specific important date — often in the spring or early summer. You will need to prove your status with documents such as a birth certificate, disability letter, military discharge papers, or a deed showing the property is your primary residence. Missing the important date usually means you cannot claim the exemption until the following year.

What happens if you disagree with your assessed value

If you believe your assessed value is too high, you can file a formal challenge called an assessment appeal or tax assessment protest. The process and important date vary by state, but you typically have 30 to 60 days after receiving your assessment notice to file. You will need to submit evidence that the value is wrong — such as a recent appraisal, comparable sales data, or documentation of property damage or defects.

Some counties hold informal hearings where you can present your case in person. Others require written submissions only. If you lose at the local level, many states allow you to appeal to a state board or court, though this is more expensive and time-consuming. Before filing an appeal, check whether your county offers a free assessment review service or whether a local property tax attorney offers a free consultation.

How property tax affects your mortgage payment

If you financed your home with a mortgage, your lender requires you to pay property tax as part of your monthly payment. The lender collects an estimated amount each month and holds it in an escrow account. When your tax bill is due, the lender pays it from that account on your behalf. This protects the lender's investment — if you stopped paying property tax, the county could eventually foreclose on the home.

Your monthly escrow payment is recalculated once or twice per year based on your actual tax bill. If your assessed value increases and your tax bill rises, your monthly payment will increase at the next recalculation. Conversely, if your bill decreases, your monthly payment may go down. You can request an escrow analysis from your lender to see how much they are collecting and whether an adjustment is needed.

Paying your property tax bill

Property tax bills are sent by your county tax collector or assessor's office. Payment methods vary by location — you may be able to pay online, by mail, by phone, or in person at the tax collector's office. Some counties offer a discount if you pay the full year's bill early, while others charge a penalty if you pay late.

If you cannot pay your full bill, contact your tax collector's office when ready. Many counties offer payment plans that allow you to spread the cost over several months. If you fall behind on property tax, the county can place a lien on your property, meaning they have a legal claim against it. After a set period — usually two to three years — the county may foreclose and sell the property to recover the unpaid tax.

Frequently Asked Questions

Is property tax the same as estate tax?

No. Property tax is an annual local tax on real estate you own. Estate tax is a federal tax on the total value of everything you leave behind when you die, and it only applies to very large estates. You pay property tax every year; your heirs deal with estate tax only once, when your property passes to them.

Can I deduct property tax on my federal income tax return?

Yes, if you itemize deductions on your federal return. You can deduct up to $10,000 per year in state and local taxes combined, including property tax. If your property tax is higher than $10,000, you cannot deduct the excess. Many people find that the standard deduction is larger than their itemized deductions, so they do not benefit from this deduction.

What happens if I do not pay my property tax?

The county will send you notices and may charge penalties and interest. If you continue not to pay, the county can place a lien on your property, meaning they have a legal claim against it. Eventually, the county may foreclose and sell your home to recover the unpaid tax. Contact your tax collector if you are struggling to pay — many offer payment plans or hardship programs.

Can my property tax bill change from year to year?

Yes. Your bill can change if your assessed value changes, if your local tax rate changes, or if you gain or lose an exemption. Some states cap how much the assessed value can increase annually, but others do not. You will receive a new assessment notice if your value changes significantly.

How do I find out what my property tax rate is?

Check your property tax bill — the rate is usually listed there. You can also contact your county assessor's office or tax collector's office by phone or visit their website. Many counties post tax rates online along with other property information.