How is property tax calculated?

Last updated Mar 15, 2021

Property tax is calculated by multiplying the assessed value of the property by the tax rate. In some states, an assessment ratio is applied which determines the percentage of the assessed market value that is taxable.

The assessed value is determined by the county assessor, signifying the monetary worth of your property. However, it's important to know whether this assessment is fair.

Assessed values

To determine an assessment, the assessor may look at your property's sale price or recent sales around your neighborhood that are comparable to your property. This process happens every one to five years. In some states such as California, there are rent control laws that prevent assessed values from rising faster than the rate of inflation (usually 2%).

The assessment ratio

The assessment ratio is the portion of the assessed value that can be taxed. Again, this can differ from state to state. For instance, Mississippi has one of the lowest ratios at 10%, while Massachusetts has one of the highest ratios at 100%. In other words in Mississippi, if a home is assessed at $1,000,000, only $100,000 is taxable.

Tax rate

The tax rate is the percent applied to the assessed value * assessment ratio to determine the final tax amount. Tax rates are determined by the state and local government. Some cities also have additional fees that are voted in by the local community. All of these tax rates are added together to form the final tax rate (also known as the mill rate).