Even if you like surprises, you probably don’t feel the same about your finances. For many households in the U.S., their home represents about 45% of their overall wealth. Since has its share of financial curveballs, it's important to minimize surprises wherever possible.
One of the areas you can prepare for is property taxes—the taxes that governments impose annually on property owners in their locale. If you understand how property taxes are calculated, you can budget for the expense more accurately. Even better, you can be confident you’re taking advantage of all the savings opportunities available.
Though occasional variations exist, state and local jurisdictions generally use a similar method to calculate property tax. In this article, we’ll explain how to calculate property tax and provide many sample calculations for you along the way.
What Are Property Taxes?
Local governments levy a property tax on commercial and residential properties within their tax jurisdiction.
Property taxes generate funds for community services such as schools, fire and police stations, libraries, water and sewer departments, and emergency services. Since all property owners benefit from these services, everyone is required to contribute.
The property tax rate in your town and your home’s assessed value are the two main factors determining your property tax amount.
The Basic Formula for Calculating Property Tax
Tax Rate Calculation:
Most jurisdictions use the same basic calculation for determining property tax:
- Your home’s assessed value – exemptions) ✕ (your area’s tax rate) = property tax total
- As an example, here’s how to calculate property tax if your property has an assessed value of $300,000 and your tax rate is 1.2%:
- ($300,000 – $0 exemptions) × 0.012 = $3,600
Mill Rate Calculation:
Other states or jurisdictions, like Florida, use a tax rate expressed as the “millage rate” or “mill rate” for short. Typically, one mill equals one one-thousandth of a dollar ($1 for every $1,000 of a home’s value).
- (Your home’s assessed value – exemptions) ✕ (your area’s millage rate) / 1,000 = property tax total
- As an example, here’s how to calculate property tax if your property has an assessed value of $300,000 and your millage rate is 7:
- ($300,000 – $0 exemptions) × 7 / 1,000 = $2,100
To do your own calculation, visit your local assessor’s office to get the information specific to your home and your town. Remember to see if you qualify for property tax exemptions!
Factors That Impact Your Property Tax Bill
While assessed value and property tax rate are always part of the calculation, other factors may also play into it, depending on where you live. Here’s an explanation of all the factors that impact your bill:
Your Home’s Assessed Value
The assessed value is the value a local tax assessor assigns to your property in order to calculate property taxes. Note that this is not the same as market value. However, in many towns, the assessed value is a percentage of the market value.
Different jurisdictions use different methods to assess your home’s value; they also do it on different schedules. Very often, tax assessors determine values by considering the overall condition of your home as well as recent sale prices in your area. In some areas, they also rely on mass appraisal techniques that use sophisticated data analytics programs and statistical modeling.
Exemptions
Local governments sometimes offer exemptions that effectively reduce the taxable value of your property. You must apply for an exemption—and receive approval from your local tax authority—before you can factor this into your equation.
The Property Tax Rate
Also called a mill rate, the property tax rate is the amount of tax payable per dollar of a property's assessed value. Tax rates differ by municipality and school district.
Special Assessments
Special assessments are additional charges levied by a local governing body on property owners in a targeted area. They fund specific public infrastructure improvements or repairs. If local officials green light such a project in your area, your property tax bill will include your share of the project cost. This charge will continue to appear on your bill for a specified number of years until the project is complete.
Going Deeper: How to Calculate Property Tax in Specific States
Following are some sample property tax calculations in various states, using the state’s median property tax rate.
How to Calculate Property Tax in Texas
In Texas, the formula for calculating property taxes is:
- (Assessed value – exemptions) × tax rate = property tax total
- Example calculation for a 1.81% tax rate and $100,000 exemption:
- ($290,000 – $100,000) × .0181 = $3,439
Texas offers a variety of exemptions for homeowners, including a homestead exemption that effectively reduces your home’s assessed value by $100,000. Seniors, veterans, and disabled people may also qualify for exemptions.
Refer to your county appraisal district’s website for the tax rate and exemption information.
How to Calculate Property Taxes in New York
In New York, the formula is:
- (Assessed value – exemptions) × tax rate = property tax total
- Example calculation for a 1.23% tax rate:
- ($400,000 – $0) × .0123 = $4,920
New York also offers property tax exemptions for many of the same homeowner groups in Texas— including senior citizens, veterans, and people with disabilities.
Additionally, New York property owners who make less than $500,000 per year may also be eligible for the School Tax Relief (STAR) exemption, which offers a tax credit. While you can’t opt to deduct the credit directly from your tax bill, you can use it to pay your school taxes, saving you hundreds of dollars each year. The amount of the STAR credit varies from year to year.
How to Calculate Property Taxes in California
California determines home values according to purchase price. County assessors adjust the valuation amount each year to account for inflation; thanks to Proposition 13, they cannot raise it more than 2% per year.
Note that some areas of California are part of a Community Facilities District (CFD), also known as a Mello-Roos District. These are special districts that levy an additional tax on taxable property for purposes of providing ongoing services or making public improvements. The amount is dependent on the value of your home but is usually capped at 2%. If you live in a CFD, you’ll likely see this tax listed as a “special assessment” on your property tax bill.
The formula for calculating property tax in California is:
- Assessed value × tax rate + special assessments = property tax total
- Example calculation for a 0.74% tax rate with a 0.8% Mello-Roos tax:
- ($550,000 × .0074) + ($550,000 × .008) = $8,470
California offers a $7,000 homeowners’ exemption, applicable to primary residences only, and exemptions for veterans and disabled veterans.
How to Calculate Property Taxes in Florida
In Florida, property appraisers determine a home’s value based on its fair market (or “just”) value—what a buyer would pay for it in its current condition on the open market. Florida then applies an annual value cap to ensure that the market value does not increase by more than 3% over the previous year’s value. For commercial properties, the cap is 10%. This is known as the “Save Our Homes (SOH) Cap.”
The formula for calculating property tax in Florida is:
- (Assessed value – exemption) × tax rate = property tax total
- Example calculations for a 0.97% tax rate:
- For school taxes: ($400,000 – $50,000) × .0097 = $3,395
Note: $25,000 of the exemption applies to all property taxes; the additional $25,000 applies only to non-school taxes.
Like the other states listed, Florida also has a homestead exemption that could reduce your home’s taxable value by as much as $50,000.
The application is a bit confusing:
- The first $25,000 of your home’s value is exempt from all property taxes.
- The additional exemption of up to $25,000 applies to the assessed value between $50,000 and $75,000 and only to non-school taxes.
So if your home’s assessed value is $100,000, the first $25,000 is exempt, and $75,000 remains. The next $25,000 of value is taxable. The third $25,000 of value is exempt from non-school taxes, and the remaining $25,000 of value is taxable.
It’s important for Floridians to apply for the Homestead Exemption because it’s the only way you’ll be eligible for the SOH cap!
How Are Property Taxes Paid?
Understanding how to calculate property taxes is only half the equation—the other half is paying them. Paying a property tax bill isn’t always as straightforward as it might seem. Once you know the amount, get a handle on these other aspects of the payment process:
How will you make your payments?
If you have a mortgage, your mortgage lender will likely pay your property taxes directly to the tax collector on your behalf. They’ll determine a property tax estimate and bill you extra each month, keeping that money in an escrow account until it’s time to pay.
This reduces the risk of missed payments. However, if you own your home outright (you don’t have a mortgage), you must pay property taxes—on time and in the right amount—directly to your local assessor’s office. Usually, you can pay via an online portal, through the mail, or in person at your local tax office.
When is the tax due?
Property taxes are typically due annually or semi-annually. If you’re paying independently, note these deadlines to avoid penalties. Many tax offices offer e-reminder services to help you stay on track.
What happens if I pay late or can’t pay my bill?
If you fail to pay on time, you could incur late fees, interest charges, or even tax liens on your property. Rather than ignore a bill you can’t pay, contact your tax office to ask about installment plans or hardship programs.
Can You Lower the Amount of Money You Pay in Property Taxes?
Yes! There are a few different ways you can try to reduce your property tax liability:
Apply for exemptions: In addition to the states listed above, many others offer exemptions that can save you money if you’re eligible. Exemptions reduce the taxable value of a home, which ultimately reduces the tax bill. If you forgot or didn’t apply for an exemption you qualify for, we at Ownwell can retroactively apply for your exemption.
Appeal your property’s assessed value: Appeal your property’s assessed value: If you believe your home has been overvalued, you can file an appeal. To support your case, you may need to hire a professional appraiser and gather data on similar properties. But if you win, you could succeed in lowering your home’s assessed value—and your tax bill. If you believe your home has been overvalued, you can file an appeal. To support your case, you may need to hire a professional appraiser and gather data on similar properties. But if you win, you could succeed in lowering your home’s assessed value—and your tax bill.
Limit value-increasing renovations: Significant home improvements, such as adding rooms or pools, usually increase a home’s assessed value. If you want to minimize your tax burden, focus on more minor upgrades like landscaping or painting—projects that still enhance a home but won’t impact assessments.
Consult a professional: Services like Ownwell can help you save money on your property taxes by identifying overlooked exemptions and filing appeals on your behalf. Hiring a team of experts who are knowledgeable about your local market and experienced in presenting appeals increases your chances of winning an appeal—which could save you thousands annually—and ensures you never miss an opportunity to save.
If you’re looking for more ways to lighten the financial load associated with homeownership, consider the other hidden costs!
Understanding Property Tax Is Key To Managing It
For homeowners, it’s crucial to understand how tax officials calculate your annual property tax. Amounts may change yearly, but at least you’ll be armed with important information that can help you determine if you’re paying the right amount.
Sign up with Ownwell if you’d like an analysis of your home’s assessed value or the help of an expert in launching an appeal.
In less than three minutes, we’ll have all the information we need to determine if your property has been overassessed. On average, we save homeowners like you $1,148 annually, and you pay nothing unless we win.
Our process is risk-free—and is the best way to get the savings you deserve!
