Property tax is a tax levied by local governments on real estate you own. It's calculated by multiplying your property's assessed value by the local tax rate. The revenue funds schools, roads, police, fire departments, and other public services.
Unlike income or sales taxes, property taxes are based on what you own—not what you earn or spend. You pay them annually (or in installments) whether or not you have a mortgage. If you do have a mortgage, your lender often collects property taxes monthly through escrow.
Property tax is one of the largest ongoing costs of homeownership, often ranging from 1% to 3% of your home's value each year depending on where you live.
Property taxes are unavoidable, but they're not fixed. You have more control than you think.
Two levers affect your bill:
1. Tax rate: Set by local governments. You influence this through voting and attending budget hearings.
2. Assessed value: Set by your county. You can challenge this through a property tax appeal if it's too high.
Most homeowners focus on the rate and ignore the value. But appealing an inflated assessment is often the fastest way to real savings—without waiting for politicians to cut rates.
A Texas homeowner with a $400,000 home:
Assessed value: $400,000
Homestead exemption: -$100,000 (for school taxes)
Taxable value: $300,000 (schools) / $400,000 (other entities)
Combined tax rate: 2.5%
Annual property tax: approximately $9,000
This $9,000 goes to the school district, county, city, and various special districts—each setting their own portion of the total rate.
Property tax = Assessed Value × Tax Rate. Your assessed value is determined by the county. Your tax rate is the combined rates of all taxing entities (schools, city, county, special districts). Exemptions reduce your taxable value before the calculation.
Due dates vary by state and county. Texas property taxes are due January 31. California has two installments: December 10 and April 10. Check with your county tax collector for exact dates.
Unpaid property taxes become delinquent and accrue penalties and interest. Eventually, the county can place a tax lien on your property and potentially sell it at a tax sale to recover the debt.