Property Tax

Property tax is the annual tax on real estate levied by local governments, set as a rate against the assessed value the county assigns. Effective rates run roughly 0.3% in Hawaii and Colorado to 2.5% in New Jersey and Illinois, and the median American household pays roughly $2,900 a year. The bill funds schools, counties, and services, and it is the largest recurring cost of ownership after the mortgage.

The assessment is the mechanism: the county assigns a value, the millage rate multiplies it, and exemptions soften the bill for homesteads, seniors, and veterans. A $400,000 home at a 1.2% effective rate is $4,800 a year, $400 a month, collected through escrow with the mortgage payment. The reassessment is the input that moves the bill: a reassessment to $460,000 at the same rate is $5,520, a $60 monthly increase.

The machinery runs on the assessment. The county assessor assigns a value, commonly a percentage of market value or a fraction of it, and the millage rate multiplies the assessed value: a $400,000 home assessed at 100% with a 1.2% rate is $4,800. The bill lands annually or semiannually, and the escrow account pays it when it does.

The exemptions are the softeners. The homestead exemption removes a fixed amount or a percentage of value from the assessment for a primary residence, and senior, veteran, and disability exemptions stack where the state offers them; Florida's homestead cap limits assessment growth to 3% a year, which is the version that compounds. The appeal is the lever: an assessment appealed with comparable sales is the correction most homeowners never file.

The deduction is the tax side: property tax deducts on Schedule A if itemizing, inside the SALT cap of $40,000 through 2029, reverting to $10,000 in 2030. The escrow is the collection: the impound account divides the annual bill by twelve, and the annual analysis passes the reassessment through to the monthly payment. The reassessment is the input; the escrow is the rail.

Property tax is the largest recurring cost of ownership after the mortgage, and it is the bill that follows the reassessment rather than the purchase. The escrow is the rail that collects it, the exemptions are the softeners, and the appeal is the lever most homeowners never pull. The deduction is the tax side, inside the SALT cap.

I watched a colleague named Brent (yes, that Brent) receive a reassessment notice, file nothing, and pay the new $5,520 bill without an appeal; the comparable sales in his block priced three homes below his assessment. The appeal he skipped was worth roughly $700 a year, and the deadline was the spring window the county set. The assessment is the input; the appeal is the lever.

The highest-leverage thing most homeowners can do is check the assessment against comparable sales every cycle and file the appeal inside the county's window, because the correction repeats annually. Check the monthly arithmetic with the budget calculator, read the collection rail in the escrow entry, and see the deduction side in the standard deduction entry.