Property taxes are the largest annual expense of homeownership after mortgage payments, averaging $2,690 nationally but ranging from $587 in Alabama to $8,797 in New Jersey annually for a median-valued home. Property tax is calculated by multiplying the assessed value by the local mill rate (tax rate per $1,000 of assessed value) — a home assessed at $300,000 with a 20-mill rate pays $6,000 per year ($300,000 × 0.020). However, assessed value often differs from market value: most jurisdictions assess at 80-100% of fair market value, and homestead exemptions can reduce the taxable amount by $25,000-75,000 for primary residences. Our property tax calculator estimates annual tax liability from assessed value (or market value with assessment ratio), local tax rate, applicable exemptions, and any special assessments. It helps homeowners verify their tax bill accuracy, homebuyers estimate ongoing costs for budgeting, and investors calculate operating expenses for rental properties.
How property tax is calculated
Property tax = Assessed Value × Tax Rate. Most jurisdictions express rates as mills (dollars per $1,000 of value) or as a percentage. A 25-mill rate equals 2.5%, so a $400,000 assessed value yields $10,000 annual tax. Assessed value may differ from market value — many states assess at a fraction of market value (e.g., Georgia assesses at 40%, so a $400,000 home is assessed at $160,000). Homestead exemptions reduce the taxable amount: Florida exempts $50,000, Texas exempts $100,000 (as of 2024), and California's Prop 13 caps assessed value increases at 2% per year regardless of market appreciation. Tax rates are set locally by combining levies from multiple taxing authorities — typically county, city, school district, and special districts (fire, library, parks) — with school taxes comprising 40-60% of the total.
Property tax rates by state
Effective property tax rates (annual tax as percentage of home value) vary dramatically: New Jersey 2.23%, Illinois 2.07%, Connecticut 2.00%, New Hampshire 1.86%, and Texas 1.68% are the highest. Hawaii 0.27%, Alabama 0.39%, Colorado 0.51%, Louisiana 0.53%, and South Carolina 0.56% are the lowest. However, low-rate states may have higher home values (Hawaii) or rely more heavily on other taxes (sales, income) to compensate. Texas has no state income tax but high property taxes; New Hampshire has no sales or income tax but the 4th-highest property tax rate. For homebuyers, the effective rate matters more than the nominal rate — a 1.5% rate on a $400,000 home costs $6,000/year ($500/month), which directly affects mortgage qualification because lenders include taxes in the debt-to-income ratio.
Appealing your property tax assessment
Homeowners can protest their assessment if they believe the assessed value exceeds fair market value — approximately 30-40% of appeals succeed, with average reductions of 7-10%. To build a case: gather comparable sales (3-5 similar homes sold recently for less than your assessed value), document property deficiencies that assessors may have missed (deferred maintenance, environmental issues, proximity to negative features), and review the property record card for factual errors (wrong square footage, incorrect number of bedrooms/bathrooms, missing condition notes). File appeals during the protest window (typically 30-60 days after assessment notices are mailed, varying by jurisdiction). Even a 5% reduction on a $400,000 assessment at a 2% tax rate saves $400 per year — compounding over a decade of ownership. Many property tax consultants work on contingency, taking 25-40% of first-year savings.