What Are Property Taxes?
Property taxes are annual fees homeowners pay based on their home’s value and local tax rate. These taxes help fund schools, roads, and public services.
How Are Property Taxes Calculated?
Property tax = Assessed Home Value × Local Tax Rate Example: A home assessed at $300,000 with a 1.2% tax rate would owe:
$300,000 × 1.2% = $3,600 per year (or $300 per month added to the mortgage payment)
How Property Taxes Affect Your Mortgage
- 📈 Included in Monthly Mortgage Payments – Most lenders collect property taxes in escrow.
- 📑 Rates Vary by Location – Some areas have higher property taxes than others.
- 🏡 Taxes May Increase Over Time – As home values rise, property taxes may also increase.
Property Tax Rates by State
Here’s a breakdown of average property tax rates in different states:
| State | Average Property Tax Rate |
|---|---|
| New Jersey | 2.49% |
| Illinois | 2.27% |
| Texas | 1.80% |
| California | 0.76% |
| Hawaii | 0.28% |
Can You Lower Your Property Taxes?
- 📝 Check Your Home’s Assessed Value – If it’s too high, you can appeal the assessment.
- 🏡 Look for Property Tax Exemptions – Some states offer tax relief for seniors, veterans, or low-income homeowners.
- 💰 Compare Local Tax Rates Before Buying – Research different areas to find lower tax rates.
The Bottom Line
Property taxes are a key part of homeownership and can affect your monthly budget. Understanding how they’re calculated helps you plan your finances better.
“Property taxes are a necessary cost of homeownership, but there are ways to manage and reduce them.”
— Sarah Thompson, Real Estate Advisor
Frequently Asked Questions
Are property taxes included in my mortgage?
Yes, most lenders add property taxes to your monthly mortgage payment.
Do property taxes change every year?
Yes, they can increase or decrease based on home value and tax rates.
Can I challenge my property tax assessment?
Yes, you can file an appeal if you believe your home was overvalued.