How property tax works
Property tax is usually based on a local jurisdiction’s assessed value for your home. While your home’s market value may change year to year, assessors often apply an assessment ratio to determine the assessed value used for tax purposes.
Once assessed value is calculated, exemptions or deductions may reduce the amount you actually pay tax on. The remaining amount is called the taxable value. Your taxable value is multiplied by the combined rates from the taxing authorities in your area.
Assessed value vs taxable value
Assessed value is typically the number your assessor uses as a baseline. Taxable value is what remains after subtracting exemptions. For example, a $25,000 homestead exemption reduces taxable value by $25,000.
If your local area assesses homes at 90% and your home is worth $400,000, your assessed value would be $360,000 before exemptions.
Common tax components
Property tax bills often combine several rates. School districts, counties, cities, and special districts can all levy taxes. That’s why it’s helpful to break the total into components when budgeting.
Some locations quote rates as “mills” (millage rate), which is tax per $1,000 of assessed value. A rate of 20 mills is the same as 2.00%.
Frequently Asked Questions
How do you calculate property tax?
Property tax is typically calculated as: taxable value × (total tax rate). Taxable value is usually assessed value minus exemptions. Assessed value is market value × assessment ratio.
What is an assessment ratio?
An assessment ratio is the percentage of your home’s market value that your local jurisdiction treats as the assessed value for tax purposes. Some places assess at 100% of market value, others at a lower ratio.
What’s the difference between assessed value and taxable value?
Assessed value is the value the tax authority uses before exemptions. Taxable value is what’s left after subtracting exemptions or deductions (like a homestead exemption).
Why are there multiple tax rates (county, city, school)?
Property taxes often fund several jurisdictions. You may pay separate rates that support county services, city services, school districts, and special districts (fire, water, parks, etc.).
Is property tax the same everywhere?
No. Assessment methods and tax rates vary widely by state, county, and city. Always confirm official rates with your local assessor or tax collector.
How can I lower my property tax bill?
Common options include applying for eligible exemptions, ensuring your assessment is accurate, and filing an appeal if the assessed value is higher than comparable homes.