What is property tax?

Last updated Mar 15, 2021

Property Tax is a tax paid on property by an individual or legal entity. Most commonly, it is known as a tax on real estate property (land and/or building).

In the United States, property tax varies based on where you are. Cities, counties and school districts have the power to levy taxes against properties in their juridiction.

The property tax is calculated by multiplying the current market value of a property by the tax rate. The current value of the property is determined by county assessors. Rates vary across state to state, ranging from 0-4% of the home value.

In most counties, there is a process to appeal the tax bill.

Goal of property tax

On average, property tax is the biggest type of tax collected by a local government, more than sales tax. The local government may use the collected tax to fund public works programs such as education, fire protection, law enforcement, water and sewer systems, and other services for the community.

In 2017, school districts collected $212B in property taxes, representing 83% of their revenue. Also, in 2017, US state and local governments collected a total of $526B of revenue through property taxes, representing 47% of local government's revenue and 1% of state government's revenue.

GovernmentRevenue (billion)% of Own Source Revenue
State and local$52522%

(source: Urban-Brookings Tax Policy Center)

Second to mortgage payments, property tax is likely the largest recurring home expense that you will incur as a homeowner. Property tax is usually charged on annual basis. As the value of your home property increases over time, so does the property tax.