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Property taxes help pay for many vital municipal services, but they can also be a major burden for homeowners, especially when they increase unexpectedly. Fortunately, there are strategies you can utilize to lower your home's assessed value and keep your overall housing costs down.
Property taxes are a type of tax paid to your local and state government based on the assessed value of your property.
Property taxes help your local government pay for a wide range of vital services, including public schools, fire and police departments, maintaining public spaces and infrastructure, and social services.
Anyone who owns real property is typically required to pay property taxes. Real property refers to land and any permanent structure affixed to it. If you're a homeowner, you'll need to pay property taxes.
If you're a renter, your home's property taxes are probably factored into your monthly rent, but it's ultimately the owner of the property who's responsible for paying the taxing authority.
If you have a mortgage, you'll typically pay a portion of your property taxes in each of your monthly payments. Then, when your tax bill is due, your mortgage lender will pay those taxes on your behalf out of your escrow account.
Property taxes are calculated based on the assessed value of your home. This is different from the market value, which is what the home would likely sell for if it was listed on the market today.
Your assessed value may be lower than your current market value. In fact, in many places in the U.S., assessed value is a percentage of the market value.
Property tax rates vary depending on the city, county, and school district you're in. You may see your property tax rate shown either as a percentage of the assessed value, or as a mill rate.
A mill rate or millage rate is what you pay per dollar of assessed value. One mill is equal to 1/1000 of a dollar. Take a look at the example below to get a better idea of what this looks like in practice.
To calculate your yearly tax bill when your tax rate is a percentage of your assessed value, simply multiply your assessed value by your tax rate:
Assessed value × property tax rate = property taxes owed
For example, if your home's assessed value is $100,000 and your property tax rate is 1.5%, you'll owe $1,500 in property taxes for the year.
Calculating your tax bill with a millage rate is similar, but requires one extra step. First, you'll multiple your assessed value by the millage rate, then divide that number by 1,000. So:
Assessed value × millage rate / 1,000 = property taxes owed
Continuing with our example above, if your home's assessed value is $100,000 but your local taxing authority instead uses a millage rate of 20 mills, you'd pay $2,000 in property taxes.
To figure out how much your property taxes will add to your monthly mortgage payment, just divide your total estimated tax bill by 12. This means that with the latter example, you'd pay around $167 per month so your mortgage lender can pay your taxes when they come due.
The first thing you'll want to do if you're looking to lower your property tax bill is see if you qualify for any exemptions.
"Homeowners should take the time to find a list of available exemptions from their local assessor or state comptroller and then compare their own situation," says Chris Gleason, CEO of Simplicite Tax Loans. "Occupancy-related exemptions aren't the only ones available. Sometimes things like disabilities, age, and veteran status can bring additional discounts — but people never bother to apply for them."
See if you qualify for your state's homestead exemption. Some states with homestead exemptions require homeowners to be above a certain age, have a disability, or be a military veteran to qualify for this exemption. Many states have specific exemptions for veterans with disabilities as well.
You can deduct a portion of what you paid in property taxes when you file your income taxes each year. So while you're not technically lowering your property taxes, you are reducing your taxable income, potentially lowering your tax liability or boosting your tax refund.
You can only take advantage of this if you itemize your deductions rather than taking the standard deduction, and you can't deduct more than $10,000 per year.
If your assessed value is based on incorrect information — for example, the assessor's office has the wrong square footage for your home — getting that corrected may help you lower property tax bill.
If you receive a new property tax assessment and you feel it's too high, you have the option to appeal it. You can do this yourself or hire a lawyer or company to appeal on your behalf.
"There are plenty of property tax pros in every state that can help with tax protests or appeals," Gleason says. "Often times their services are essentially free because they get paid on contingency. If they're not successful in getting your tax bill lowered, you don't owe them a dime. If they are successful, their fee is only a fraction of what they saved you."
You'll need to have evidence showing why you think your assessed value is lower. And pay attention to deadlines, since you'll typically have a limited amount of time to submit your appeal.
Companies like Ownwell can help contest your property tax assessment. You'll only pay in the event that they are able to lower your taxes. Read our Ownwell review for more information.
Making big updates or additions to your home can result in your assessed value going up, leading to a higher tax bill. Things like building a garage or putting in a pool, for example, may impact your property taxes.
Regular home maintenance or smaller improvements generally won't raise your assessed value.
If you want a say in how much you pay in property taxes, one of the best things you can do is vote in your local elections and stay informed of how proposed tax increases could benefit or hurt the community.
Why are my property taxes so high? Chevron icon It indicates an expandable section or menu, or sometimes previous / next navigation options.
Your property taxes may be high because your tax rate is high, your assessed value has gone up, or a combination of both. Home values have increased significantly in recent years, raising tax bills for many homeowners.
What happens if I can't pay my property taxes? Chevron icon It indicates an expandable section or menu, or sometimes previous / next navigation options.
If you can't pay your property taxes, it's important to work with your local taxing authority to see what your options are, such as setting up a payment plan. If you don't pay your property taxes, you could ultimately lose your home.
How do I appeal my property tax assessment? Chevron icon It indicates an expandable section or menu, or sometimes previous / next navigation options.
The process to appeal your property tax assessment varies depending on where you're located, but you'll typically need to file an appeal within a certain amount of time of receiving your new assessment and provide evidence that the assessment is too high.
Can I lower my property taxes without appealing? Chevron icon It indicates an expandable section or menu, or sometimes previous / next navigation options.
You may be able to lower your property taxes if you qualify for an exemption or find a mistake on your tax bill (for example, the assessed value is based on incorrect square footage).
