Property Taxes, Explained
Property tax is often the second-largest part of a mortgage payment, and it varies more from place to place than any other housing cost.
How a property tax bill is calculated
Local governments — counties, cities, school districts and special districts — fund themselves largely with property taxes. Your bill generally follows this pattern:
Assessed value = market value × assessment ratio (set by your state or county)
Taxable value = assessed value − exemptions
Tax = taxable value × tax rate (often quoted in mills: 1 mill = $1 per $1,000)
Because assessment ratios, rates and exemptions differ so much, comparing nominal tax rates between places is misleading. The effective tax rate — tax paid divided by market value — cuts through that.
Effective rates by state
Using the U.S. Census Bureau’s 2024 American Community Survey, we divide each state’s median real estate taxes paid by its median owner-occupied home value. Nationally that is $3,211 ÷ $360,600 ≈ 0.89%.
| State | Effective rate | Median tax paid | Median home value |
|---|---|---|---|
| Illinois | 1.92% | $5,399 | $280,700 |
| New Jersey | 1.89% | $9,358 | $496,000 |
| Connecticut | 1.66% | $6,573 | $396,900 |
| New Hampshire | 1.46% | $6,707 | $458,800 |
| New York | 1.45% | $6,542 | $449,800 |
| South Carolina | 0.45% | $1,337 | $299,500 |
| Arizona | 0.43% | $1,828 | $426,000 |
| Idaho | 0.43% | $1,912 | $446,400 |
| Alabama | 0.38% | $890 | $233,300 |
| Hawaii | 0.27% | $2,385 | $875,900 |
High rates don’t always mean high bills: Illinois has a higher effective rate than New Jersey in this data, but New Jersey’s higher home values give it a larger median bill. See every state in the property tax by state table.
Exemptions and caps
- Homestead exemptions reduce the taxable value of a primary residence in many states.
- Senior, veteran and disability exemptions or freezes are common.
- Assessment caps in some states limit how fast an owner’s assessed value can rise — which means a new buyer’s bill, based on the sale price, can be much higher than the previous owner’s.
When budgeting for a purchase, don’t rely on the seller’s current tax bill. Ask the county assessor how the property will be reassessed after the sale.
Escrow: how most owners pay
If your lender requires an escrow account, your monthly mortgage payment includes one-twelfth of the estimated annual tax. The servicer pays the bill when due and reviews the account yearly; if taxes rise, your monthly payment rises too. At closing you usually fund a starting cushion — Freddie Mac notes most lenders require two months of reserves.
Appealing your assessment
If your assessed value looks too high compared with similar homes, most jurisdictions have an appeal process with strict deadlines. Evidence usually means recent sales of comparable homes or an appraisal.
About the data
The median-to-median method is a standard approximation used to compare states; it is not the rate that applies to any particular home. The Census top-codes median taxes at $10,000, which slightly understates rates in the most expensive areas. Estimates are from a survey and have margins of error.
Sources
- U.S. Census Bureau, American Community Survey 2024 1-year estimates, table B25103 (median real estate taxes paid) and table B25077 (median value, owner-occupied units)
- U.S. Census Bureau, ACS 2024 table-based summary file (raw data used for the state figures)
- Freddie Mac, “Understanding homebuying costs,” My Home by Freddie Mac (accessed September 2026)