What Is Property Tax?

How the bill is calculated

Local governments assess a value for your property and apply a rate, often expressed in mills or as a percentage. The bill funds schools, county and municipal services, and any special assessment districts you sit in.

Effective rates vary widely — from well under 0.5% to over 2% of market value depending on the state and locality.

Escrow

Most lenders collect one twelfth of the annual bill with each mortgage payment and pay the tax when due. When assessments rise, the escrow payment rises with them, which is why a fixed-rate mortgage payment is not truly fixed.

Exemptions and appeals

Homestead, senior, veteran, and disability exemptions reduce taxable value in many jurisdictions. If an assessment looks out of line with comparable properties, most counties provide a formal appeal window each year.

Keep reading

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