What Is Property Tax?
In plain English
Property tax is an annual levy imposed by local governments — counties, cities, and school districts — on real property based on its assessed value. The tax rate, called the mill rate, multiplied by the assessed value determines the bill. Rates and assessment methods vary widely by jurisdiction and fund essential public services.
How Is Property Tax Calculated?
Local assessors estimate your property's market value, then apply an assessment ratio to arrive at the assessed value. The assessed value is multiplied by the mill rate — expressed as dollars per $1,000 of value — to produce the tax bill. For example, a $400,000 assessed value at a 20-mill rate results in an $8,000 annual tax.
Can You Appeal Your Property Tax Assessment?
Yes. If you believe your assessed value is too high, you can file an appeal with your local assessor's office or a review board. Evidence such as recent comparable sales, an independent appraisal, or documentation of property deficiencies can support a reduction. Appeal deadlines vary by jurisdiction, so act promptly after receiving your assessment notice.
Is Property Tax Deductible on Your Federal Return?
Property taxes paid on real estate are deductible if you itemize, but the deduction is capped at $10,000 combined with state and local income or sales taxes (the SALT cap). You can only deduct taxes actually paid during the tax year, not amounts held in escrow. Primary and secondary residences qualify; investment property taxes are deducted separately as a business expense.
Frequently asked questions
What happens if I don't pay my property taxes?
Unpaid property taxes accrue interest and penalties. After a period that varies by state, the government can place a tax lien on your property and ultimately foreclose to collect the debt — even if you own the property outright with no mortgage.
Are there property tax exemptions for seniors or veterans?
Many jurisdictions offer homestead exemptions, senior freeze programs, or veteran exemptions that reduce assessed value or cap annual tax increases. Eligibility requirements and benefit amounts vary significantly — check with your local assessor's office to see what you qualify for.
Keep exploring
Related terms
Itemized Deductions
Itemized deductions let you list specific qualifying expenses to reduce taxable income instead of taking the standard deduction. They benefit taxpayers with large mortgage interest, medical bills, or charitable contributions.
Tax Deduction
A tax deduction reduces your taxable income, lowering the amount of income subject to tax. The actual tax savings depend on your marginal tax bracket.
Sales Tax
Sales tax is a consumption tax collected by retailers at the point of sale and remitted to state and local governments. Rates and taxable goods vary by state and locality.
Tax-Deferred
Tax-deferred means taxes on investment earnings or contributions are postponed until a future date — usually retirement — allowing compounding to work on pre-tax dollars in the meantime.
Estate Tax
The federal estate tax applies to the transfer of wealth from a deceased person's estate to heirs when the estate's value exceeds a high exemption threshold. Most estates owe no federal estate tax.