How property tax is calculated
Property tax is based on the assessed value of your home and the local tax rate. Some areas assess at full market value and others at a fraction of it. Exemptions reduce the taxable value.
The formula
Yearly tax = (market value × assessment ratio − exemptions) × tax rate
Worked example
The owner of a $400,000 home taxed at an effective rate of 0.9%, close to the recent national average, owes $3,600 a year, or $300 a month. Rates vary widely by state and county.
How to use this calculator
Enter the home’s value, the assessment ratio your area uses, the tax rate and any exemptions you qualify for. The property tax calculator shows the yearly bill and the monthly amount. If you do not know the ratio or the rate, your county assessor or your latest tax bill will list them.
More examples
With an assessment ratio and an exemption
These numbers are examples. Your area’s ratio, exemption and rate will differ.
- Market value: $400,000.
- Assessment ratio of 80%: $400,000 × 0.80 = $320,000 assessed value.
- Exemption of $50,000: $320,000 − $50,000 = $270,000 taxable value.
- Tax rate of 1.25%: $270,000 × 0.0125 = $3,375 a year, or $281.25 a month.
The bill of $3,375 is about 0.84% of the home’s $400,000 market value. That figure is the effective rate, and it is the fairest way to compare one area with another.
The same home at three effective rates
Effective rates run from roughly 0.3% to 1.8% depending on the state.
| Effective rate | Yearly tax on $400,000 | Monthly |
|---|---|---|
| 0.3% | $1,200 | $100 |
| 0.9% | $3,600 | $300 |
| 1.8% | $7,200 | $600 |
When the rate is in mills
Divide mills by 10 to get a percentage. A rate of 15 mills is 1.5%. On $270,000 of taxable value that is $4,050 a year.
What changes the result
- Assessed value. When the assessor raises your home’s value, the bill rises even if the rate stays the same.
- Tax rate. Local governments and school districts set rates, and they can change from year to year.
- Exemptions. An exemption lowers the taxable value, so it saves the exemption amount times the tax rate. A $50,000 exemption at 1.25% saves $625 a year.
- Location. Two similar homes in neighboring counties or school districts can have very different bills.
Common mistakes
- Applying the tax rate to market value when your area taxes only a fraction of it.
- Confusing the rate printed on the bill with the effective rate.
- Assuming you will pay what the seller paid. Ask the county assessor how value is set after a sale.
- Forgetting to apply for an exemption you qualify for.
- Leaving property tax out of your monthly housing budget.
Related calculators
Add the monthly tax to your loan payment in the mortgage calculator, or see every ownership cost together in the cost of homeownership calculator. If you are still deciding on a budget, start with the home affordability calculator.
Frequently asked questions
What is a mill rate?
One mill is $1 of tax per $1,000 of assessed value. 20 mills equals 2%.
What is a homestead exemption?
A reduction in taxable value for a primary residence, offered in many states.
Can I appeal my assessment?
Yes. Most counties have an appeal process with a deadline each year.
What is the difference between assessed value and market value?
Market value is what the home would sell for. Assessed value is the figure the tax is based on. It can be the full market value or a set fraction of it, depending on where you live.
What is an effective property tax rate?
It is the yearly tax divided by the home’s market value. A $3,600 bill on a $400,000 home is an effective rate of 0.9%.
Is property tax deductible?
State and local property tax can be deductible on a federal return if you itemize, subject to the cap on state and local tax deductions. Ask a tax professional how it applies to you.
Why did my property tax go up?
Either the assessed value rose, the tax rate rose, or an exemption ended. Your tax bill or assessment notice shows which one changed.