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Homeowners must account for regular expenses above and beyond their mortgage payments — and one of the most reliable of these is their property tax. These taxes usually fund expenses for public services and institutions like schools; bridges, tunnels and roads (and their maintenance); telecommunications; and safety measures in the municipality, county or state.
Though some states may also tax other forms of property — personal assets like cars or recreational vehicles — real estate is the primary source for property tax assessments.
Property taxes vary based on where you live but start with a different baseline in each state. Once you know your state’s property tax rate, you can dig deeper to learn about property tax specific to your locality.
What are property taxes?
Property taxes are based on the value of your home and are calculated on a local basis. How much you pay will depend on your state and municipality’s tax rates and your property’s current value.
“Jurisdictions in all 50 states and the District of Columbia impose property taxes,” according to the Urban Institute & Brookings Institution’s Tax Policy Center. However, “most property tax revenue comes from local levies,” which can be imposed by:
- School Districts
- Special Districts (independent government units created for a limited, specific purpose)
Property taxes can be reassessed (change) annually, but some municipalities adjust their rates only once every few years. You will want to check with your city or county assessor’s office for more information on the frequency of property tax calculation.
Property taxes by state
The table below shows average property taxes by state, in alphabetical order. It indicates both the annual property tax on a median-value home in the state and, for comparison, what the property tax would be on the U.S. national median home sales price of $440,300, as of the second quarter of 2022.
|State||Average State Tax Rate||Median Home Value||Annual Tax on Median Value Home in State||Annual Tax on Median Value Home in U.S. ($440,300)*|
*as of Q2 2022
Sources: Roofstock.com, Zillow Home Values Index, FRED (Federal Reserve Bank of St. Louis)
|District of Columbia||0.56%||$811,792||$4,546||$2,466|
How are property taxes calculated?
Property taxes are calculated based on your local tax rate and your property’s value. Your local assessor will determine your home’s assessed value, which is likely to be less than its fair-market value.
Your home, its overall condition, and any significant improvements (a gutted and remodeled kitchen, or an in-ground pool, for instance) may be considered as factors by your local assessor. They will also consider the plot your home is located on and the value of the land itself as they calculate your property tax.
Why do property taxes vary?
According to the World Population Review, “the average American household spends about $2,375 in property taxes… each year.” The actual amount varies depending on where you live and the exact value of your home – which is why everyone’s property tax rate is slightly different.
Who pays property taxes?
Average homeowners can expect to pay property taxes as part of the basic cost of buying and owning a home. However, some property types and populations may be exempt from paying property tax.
The National Association of Counties maintains a list of property tax exemptions by state. Some exemptions relate to the home/property owner, others to the property itself.
Military and veterans
Active members of the military and veterans are often eligible for tax exemptions, the details of which vary broadly by state. Disabled veterans, surviving spouses, or surviving children may also qualify for special exemptions.
In some states, senior citizens are exempt from paying property taxes. Depending on the state, this may be a designation for those aged 62, 65, or older.
Widows and widowers
Homeowners who have lost their spouses may be eligible for a partial property tax credit or exemption, depending on their state.
Many states offer exemptions from this tax for homeowners who qualify as being disabled. This eligibility often follows the determination of disability from a U.S. government agency.
Some states and localities offer property tax exemptions to people who meet poverty guidelines or other income thresholds.
Exemptions based on property type
If you are paying property tax on your primary residence, you may be eligible for a homestead exemption. This exemption prevents the sale of a home in order to pay off taxes or creditors (with the exception of mortgage lenders).
Religious and nonprofit organizations
If a religious or nonprofit organization owns the property, its locality may exempt the group from paying property tax. This will depend on your organizational structure and local statutes.
Though this would not apply to a home, it could apply to the property taxes assessed on land you own. If you use your land for farming or agricultural purposes, check to see if you qualify for an exemption.
Properties owned by the federal, state, or local governments are typically exempt from property taxes.
Tips for lowering property taxes
In addition to the exemption possibilities listed above, you may be able to decrease your annual property tax in a couple of ways.
There may be a discount available if you pay your property tax as a lump sum each year rather than through the escrow account on your mortgage, collected as a part of your monthly mortgage payment. Check with your local property tax assessor’s office to see if paying a direct lump sum is an option.
You may also ask to have your property value reassessed. If your property taxes are calculated every few years, and you suspect your property value has declined, you may owe less than you currently pay. Another reason to request reassessment is if you suspect an error in your property tax calculation, such as incorrect square footage or lot size.
Final word on property taxes by state
Ultimately, your property taxes will hinge on where you live and will change over time. Do not expect your annual property tax payment to be static; local levies shift and flow, and sometimes property tax rates make it to the ballot for residents’ weigh-in through a vote. Property values are also always in flux, so be aware that as your property value rises, so will your calculated tax. Staying on top of your tax rate, property value, and exemption eligibility will help you be mindful of the impact on your budget.