Property Tax

Three numbers set a property tax bill. The first is the assessed value. A local assessor estimates what the property is worth, then may apply an assessment ratio, so a state that assesses homes at a fraction of market value taxes only that fraction. The second is exemptions, which subtract from the assessed value. Many states offer a homestead exemption on a main home and extra relief for seniors, veterans or people with disabilities, and many must be applied for rather than granted automatically.

The third is the rate. Your home usually sits inside several taxing districts at once, such as a county, a city, a school district and special districts for things like fire protection or libraries, and each sets its own levy. Rates are often stated in mills: one mill is $1 of tax per $1,000 of taxable value, or 0.1%. Other places quote a percentage or dollars per $100 of value.

Assessments are updated on a schedule that varies widely, from every year to every several years, and some states cap how fast a home’s assessed value can rise while the same owner holds it. That is why two identical houses on one street can carry very different bills, and why a sale or a major renovation can reset yours.

Many homeowners with a Mortgage never write a check to the tax collector. The lender collects one-twelfth of the expected yearly bill with each payment, alongside principal, interest and any mortgage insurance, holds it in an escrow account, and pays the taxing authority when the bill comes due. Federal rules let the servicer keep a cushion of no more than one-sixth of the year’s escrow payments. When the tax rises, the next escrow analysis raises your monthly payment, a common reason a fixed-rate mortgage payment goes up.

In the year you buy or sell, the bill is split. For federal tax purposes the seller is treated as paying the tax up to, but not including, the day of sale, and the buyer from that day on, whatever the lien dates are under local law. The adjustment appears on your settlement statement and in the cash you need at closing, alongside the down payment.

Once the mortgage is gone, the bill comes straight to you, often in one or two large installments a year. Skipping it is costly: the government can add penalties, place a tax lien on the home and ultimately foreclose, even if you owe nothing to any lender.

Property tax on your home is deductible only if you claim itemized deductions instead of the standard deduction, which for 2026 is $32,200 for married couples filing jointly and $16,100 for single filers. It goes on Schedule A and shares the SALT deduction cap with state and local income or sales tax: $40,400 for 2026, reduced by 30% of modified AGI above $505,000 but never below $10,000. Married people filing separately get half of each figure.

You deduct only tax actually paid to the taxing authority during the year, including payments your lender made from escrow; money sitting in escrow doesn’t count until it is paid out. The tax must be assessed at a uniform rate on property throughout the community and used for general public purposes. Charges for services and association dues fall outside it, and assessments for local improvements that raise your property’s value are added to its cost basis instead, as the table shows.

Property tax on a rental home is different: it is an expense of the rental, deducted on Schedule E against rent alongside depreciation, whether or not you itemize and outside the SALT cap. Foreign property tax on a personal home has not been deductible since 2018.

Property tax outlasts the mortgage. It rises with assessments and local budgets rather than falling with your loan balance, so a household that pays off its home before retiring still carries it, along with insurance and maintenance, for as long as it owns the place. The bill can be large enough to shape where to retire, and it belongs in any rent vs. buy comparison. Steps that can keep it in check: