Ongoing ownership costs
Property tax, explained
Property tax is money you pay to your local government for owning a home. It helps pay for things near you, such as schools, roads, libraries, firefighters, and police. The government may use its own value for your home when it decides the bill, so the bill is not always based on the price you paid.
Published and maintained by Kevin Song for Your Home Cost. Last reviewed: . How guides are reviewed.
3 cited sources
Why it changes your estimate
Property tax continues even after the mortgage is paid off and can change over time. For planning, this calculator multiplies the home price by the yearly tax-rate percentage, then divides by 12. That shortcut may differ from the actual bill because the tax authority may use another taxable value.
What to enter
Use the best yearly effective tax rate for the exact property. The local assessor or taxing authority is the office that values property and issues or supports the bill. If you have an estimated annual tax amount instead of a rate, divide annual tax by home price and multiply by 100. Do not paste a millage rate unless it truly works as a purchase-price-based percentage. Replace broad city or state context with address-specific information when available.
Good to know
The Census planning benchmark used by the calculator is a rough ratio: the area's median yearly real-estate tax for mortgaged homes divided by the area's median value for mortgaged homes. It is a ratio of two American Community Survey medians, not the median of address-level tax rates, a statutory millage rate, or a calculation using this home's assessment. Survey sampling and a fallback from city to state or national data can make it broader than the selected place. An assessment is the government's value for tax purposes. Exemptions, assessment caps, taxing districts, a sale, and a reassessment can all change the real bill, so the seller's current bill may not be yours. Escrow only means the lender collects expected tax monthly and pays it later; it does not reduce or freeze the tax.
Verify the post-purchase tax, not only the seller's bill
Look up the exact parcel on the assessor and tax-collector sites and identify the assessed value, taxable value, exemptions, taxing districts, and current annual bill. Then ask the local office how a sale affects assessment and when a new value would reach the bill. The seller may have exemptions, caps, or an older assessment that will not transfer, so copying the current bill can materially understate the buyer's later cost.
Request a lender estimate too, but keep escrow mechanics separate from the tax itself. An escrow deposit or cushion changes cash due at closing, while the projected annual tax drives the ongoing monthly budget. If reassessment timing is uncertain, run a current-bill scenario and a post-sale scenario and retain the higher monthly amount until an address-specific estimate is available.
- Match the listing address to the correct parcel and every applicable taxing district.
- Ask which exemptions or assessment limits end when ownership changes.
- Model the likely post-sale bill separately from escrow deposits collected at closing.
Worked example
A simple 1.2% estimate on a $400,000 home is $4,800 per year, or $400 per month. The actual authority may apply the rate to a different taxable value or add exemptions and district charges.
Sources and citations
These references support the definitions, planning guidance, and program rules above. A citation does not mean its publisher endorses this guide.
Original planning exercise
Translate a future annual bill into a usable input
A $400,000 property has a seller's current bill of $3,000. Suppose the local assessor provides a purchase-specific next-year estimate of $5,200. These are hypothetical bills, not a claim about any jurisdiction's reassessment rules.
Illustrative assumptions, not quotes or forecasts. Calculations by Your Home Cost; mortgage payment examples use the calculator's shared fixed-rate formula.
| Option or step | Calculation | Planning result |
|---|---|---|
| Seller's bill | $3,000 ÷ $400,000 × 100 = 0.75% | $250/month |
| Next-year estimate | $5,200 ÷ $400,000 × 100 = 1.30% | $433.33/month |
| Budget change | ($5,200 − $3,000) ÷ 12 | $183.33/month more |
What the comparison tells you
Both percentages can be arithmetically correct while describing different tax years or exemption assumptions. The calculator's price-based rate is only a way to reproduce the chosen annual amount. It is not necessarily the legal tax rate or the rate applied to assessed value.
Evidence to collect
Record the tax year, assessed value, exemptions, special district charges and whether a purchase changes any of them. Ask the assessor which charges its estimate includes and when a new bill would take effect.
Apply it in the calculator
Enter 1.30% to reproduce the $5,200 annual estimate on this $400,000 price. If you later change the home price but still expect a $5,200 bill, calculate a new percentage.
Original planning exercise added . Source-review dates above are maintained separately.