Locally levied
How property taxes work
US property tax rates vary widely — from 0.3% (Hawaii) to 2.5%+ (New Jersey, Illinois) of assessed home value annually. On a $300,000 home, that's $900 to $7,500/year. Most lenders escrow taxes and insurance into the monthly mortgage payment. Annual reassessments can raise taxes faster than inflation; many states have caps (like California's Prop 13) that limit increases.
Level
Try calculatorKey takeaways
04 · ideas- Property tax = assessed value x mill rate
- Assessed value is often different from market value
- Homestead exemptions can reduce the taxable value
- Most mortgages collect property taxes in monthly escrow
Property taxes are levied by local governments on real property. They are calculated annually and represent a significant ongoing cost of homeownership.
Basic formula:$$\text{Property tax} = \text{Assessed value} \times \text{Mill rate} \div 1,000$$
A mill is $1 per $1,000 of assessed value. A mill rate of 15 on a $350,000 assessed value = $5,250/year.
Assessed value vs. market value: Many jurisdictions assess property at a percentage of market value (the assessment ratio). If the assessment ratio is 80% and market value is $400,000, assessed value is $320,000.