Property tax starts with your home's assessed value, multiplied by your local tax rate

The basic formula is straightforward: assessed value × tax rate = property tax owed. Your assessor determines the assessed value by looking at your property's characteristics and recent sales of similar homes in your area. Your local government then sets a tax rate, usually expressed as a percentage or as dollars per $1,000 of assessed value. Multiply those two numbers and you have your annual bill.

The catch is that assessed value is not the same as market value — the price your home would sell for today. Assessors use market value as a starting point, but then explore local rules about how often to reassess, whether to cap increases year to year, and whether certain properties get exemptions. These rules vary significantly by state and county, which is why two identical homes in different places can have vastly different tax bills.

Key Takeaways

  • Property tax equals your home's assessed value times your local tax rate, with both numbers set by government bodies rather than calculated by you.
  • Assessed value is based on market value but adjusted by state and local rules about reassessment frequency, increase caps, and exemptions.
  • Tax rates are set by your county or municipality and often expressed as a percentage of assessed value or as a dollar amount per $1,000 of value.
  • Your assessment notice and tax bill should both show the assessed value and the rate used, so you can verify the math yourself.

How assessors determine your home's assessed value

Your county or municipal assessor's office is responsible for estimating what your property is worth. They do this by collecting data on your home: square footage, lot size, number of bedrooms and bathrooms, age, condition, and any recent renovations. They also look at recent sales of comparable homes — houses similar to yours that sold recently in your neighborhood or nearby areas.

Some assessors use computer models that weight these factors automatically. Others review properties in person on a set schedule, which might be every year, every three years, or every five years depending on your state. A few states reassess only when a property changes hands. The frequency of reassessment matters because it determines how quickly your assessed value catches up to actual market changes.

The assessed value the assessor arrives at is usually lower than the actual market value. Many states cap assessed value at 50 to 70 percent of market value by law. Some states use different percentages for different property types — agricultural land might be assessed at 30 percent of market value while residential land is assessed at 60 percent. Check your state's assessment rules to understand what percentage applies to your property type.

Tax rates: who sets them and how they work

Once assessed values are set, your local government — usually the county, city, or school district — decides how much tax revenue it needs and sets a rate accordingly. The rate is often expressed in one of two ways: as a percentage of assessed value, or as a dollar amount per $1,000 of assessed value.

For example, a rate of 1.2 percent means you pay $1.20 in tax for every $100 of assessed value. A rate expressed as "$12 per $1,000" means the same thing: $12 for every $1,000 of assessed value, which equals 1.2 percent. Your property tax bill will show which format your locality uses.

Tax rates are not uniform across a state. A home assessed at $300,000 in one county might have a tax rate of 0.8 percent, while an identical home in a neighboring county has a rate of 1.5 percent. Rates depend on local spending needs — schools, roads, emergency services, and other government functions — and on how much revenue the locality collects from other sources.

What happens after you receive your assessment notice

Your assessor will send you a notice showing the assessed value they have assigned to your property. This is your chance to check the math and the facts. Look at the property description: square footage, lot size, number of rooms, condition rating. If any of these are wrong, contact your assessor's office and ask them to correct the record. An error in square footage or a missed renovation can mean you are paying tax on a higher value than you should.

You can also compare the assessed value to recent sales of similar homes in your area. If your home is assessed at significantly more than comparable homes sold for, you may have grounds to challenge the assessment. Most states allow you to file a formal appeal or grievance within a set window — often 30 to 90 days after you receive the notice. The process and important date vary by state, so check your assessor's website or call their office to learn your local rules.

How exemptions and special assessments change the calculation

Some properties pay less tax than the standard formula would suggest because they may have access to for an exemption. Homestead exemptions, available in many states, reduce assessed value for primary residences. Senior citizen exemptions, veteran exemptions, and exemptions for properties used for religious or charitable purposes are common in many states. If you may have access to for an exemption, your assessed value is lowered before the tax rate is applied.

Special assessments work in the opposite direction. If your locality builds a new road, sewer line, or other infrastructure that benefits your property, they may charge you a special assessment — an additional tax to cover the cost. This is separate from your regular property tax and is calculated based on the benefit to your property, not on assessed value.

Why your property tax bill might change year to year

Your tax bill can change for three reasons: your assessed value changed, your tax rate changed, or both. If your assessor reassesses your property and finds it is now worth more, your assessed value goes up and so does your bill. If your locality raises its tax rate to fund new spending, your bill goes up even if your assessed value stays the same.

Some states cap how much assessed value can increase in a single year, even if market value rises faster. California, for example, limits increases to 2 percent per year unless the property is sold. Other states have no cap and reassess at full market value every year. These caps mean that in a hot real estate market, your assessed value might lag behind actual market value for years.

You can find your local tax rate and any recent changes on your county assessor's or tax collector's website. Your property tax bill itself should show both the assessed value and the rate used, so you can verify that the calculation is correct.

Frequently Asked Questions

Can I calculate my property tax before I get my bill?

Yes, if you know your assessed value and your tax rate. Multiply assessed value by the tax rate (expressed as a decimal). If your rate is 1.2 percent, multiply by 0.012. If your rate is $12 per $1,000, divide your assessed value by 1,000 and multiply by 12. Your county assessor's office can tell you both numbers.

Is assessed value the same as appraised value?

No. Appraised value is what a professional appraiser estimates your home is worth, usually for a mortgage or insurance purposes. Assessed value is what your tax assessor estimates for tax purposes. Assessed value is often lower because many states cap it at a percentage of market value. An appraisal and an assessment can differ significantly.

What if I think my assessed value is too high?

Contact your assessor's office and ask how to file a challenge or grievance. Most states have a formal process with a important date — usually 30 to 90 days after you receive your assessment notice. You will need to show that the assessed value is wrong, either by pointing out errors in the property description or by comparing it to recent sales of similar homes.

Do all properties in my county pay the same tax rate?

Usually yes for residential properties, but rates can differ by property type. Commercial, agricultural, and industrial properties often have different rates than residential homes. Some states also allow certain localities to set different rates. Check your tax bill or your county assessor's website to see what rate applies to your property type.

How often does my assessed value get updated?

It depends on your state and county. Some places reassess every year, others every three to five years, and a few only when a property is sold. Your assessor's office can tell you the schedule for your area. Even if a full reassessment does not happen, your assessed value might be adjusted if you make major improvements or if the assessor discovers an error.