What Goes Into My Property Taxes?

Your monthly mortgage payment is typically based on principal, interest, taxes, and insurance(s). When you look at your mortgage statement it’s easy to understand how principal and interest are calculated. You also probably shopped for your homeowner’s insurance and can see what goes into that payment. 

The last part of your mortgage payment is property taxes. It can be difficult to understand how that number is calculated. Your property tax amount is based on your property’s value multiplied by your local tax rate, minus any exemptions. But how can you find your local tax rate? And how is the value of your home determined? Also, how do you know what exemptions you may qualify for? 

The following terms outline what makes up your property taxes. We also encourage you to visit our Property Tax FAQ for even more information.

Assessed Value

The price your home is bought and sold at is the fair market value. During your closing process, your lender likely ordered an appraisal on your home to determine the appraised value. The fair market value and the appraised value may have been similar, but likely they were not the same. Lastly, your home has an assessed value.

The assessed value of your home is determined by your local tax assessor’s office. Typically, the assessed value is determined using the market approach or the recent sales of comparable homes in your area. You should receive the value of your assessment directly from your local government. You can also look up the assessed value through your local tax assessor’s office.

If you feel your property value is different than what you expect it to be you have the right to appeal your assessed value. This can be done through your local assessor’s office. However, an appeal is not a guarantee that your value will be adjusted. You will need to ensure you have proper documentation on why you believe your value should be different than what is presented.

Property Tax Rate

Once a year, you will receive a copy of your property tax bill. This bill will break down all taxing districts that are affecting your total tax rate. Taxing districts may come from your city, county, or school districts. Your tax rate can vary greatly depending on where you live, as well as the type of property you own.

While your property tax bill is typically issued annually, the frequency with which property taxes are paid varies by state and, in some cases, by city, town, or county. For example, Connecticut property taxes may be due one, two, three, or four times per year depending on the municipality. Idaho, Iowa, Montana, New Mexico, South Dakota, and Washington generally collect property taxes in two installments each year, while Oregon and Texas typically issue one annual property tax bill. Understanding your local payment schedule can help explain why tax payments may differ depending on where your property is located.

Property Tax Exemptions

Your total property tax bill can be reduced by certain exemptions. Homeowner or Homestead exemptions are fairly common, which reduces your overall tax liability if your property is your primary residence.

Many states also offer property tax reductions or exemptions for eligible veterans, disabled veterans, or surviving spouses. Eligibility and benefit amounts vary by state, so it’s worth checking whether you qualify.

There are additional programs that can reduce your overall property tax liability. People older than 65, widowers, disabled individuals, or lower-income households may also qualify for a reduction in property taxes. Make sure you check with your county’s tax assessor to learn about any program you may qualify for.

Your final property tax rate takes into consideration your assessed value, your specific rate, and any exemptions you have qualified for. Understanding all three components helps to demystify your mortgage statement and can help you plan for your future.