Mortgage rates and insurance aren’t the only factors inflating the cost of homeownership these days—property taxes have been rising rapidly, too.
Many homeowners have been opening their mailboxes to discover property tax bills in the mid four figures, and bills above $10,000 have become common in some parts of the country, according to the nonprofit Tax Foundation.
“Homeowners get the notice in the mail,” says realtor Ed Tomlinson, “and they’re angry.” But anger isn’t the only option; despite what homeowners might imagine, it is possible to reduce one’s property taxes.
We asked Tomlinson, who wrote a book about appealing Colorado real estate appraisals, what homeowners need to know about how property taxes work. “A lot of people don’t do anything about it,” says Tomlinson. “They don’t think they can do anything. They can—it’s pretty easy.”
What Are Property Taxes?
Property taxes are fees imposed on real estate by local governments and certain other municipal entities.
These taxes not only increase the cost of homeownership, they can increase the cost of renting homes and apartments as well—researchers at the MIT Center for Real Estate and the Federal Reserve Bank of Philadelphia have found that landlords pass along much of this expense to their tenants in the form of rent increases.
Important: In some parts of the US, property taxes are imposed on “tangible personal property,” such as vehicles and business equipment, in addition to real estate. Property taxes on real estate are sometimes referred to as real estate taxes for clarity.
How Property Taxes Work
Property tax rates are set by local governments and other municipal entities. These taxes are the largest source of revenue for local governments in most parts of the US, used to fund schools, water and sewer systems, police and fire departments, road maintenance, libraries, and other services.
Property taxes are imposed and collected almost exclusively by local governments, but a small number of states do have some sort of state sales tax, such as Washington State’s State School Levy.
The size of a homeowner’s property tax bill depends largely on two factors—how much the municipality estimates that his or her property is worth, and that municipality’s property tax rates. (More about both of these factors below.) In many areas, property tax bills are divided into two semi-annual payments.
How Property Values Are Assessed
The assessed value of a property for tax purposes is typically not the same as that property’s current fair market value. Details vary by municipality, but often the assessed value figure used is a percentage of the property’s estimated fair market value as of a certain date in the not-too-distant past.
For example, a county might calculate the taxes on a home based on 80% of its fair market value as of June 30 of the prior year. That fair market value figure likely was estimated based on the actual sales prices of local properties that appear similar based on factors that include the square footage of the home, the size of the lot, and the number of bathrooms.
No human assessor typically is involved in setting this fair market value. Rather, they rely on automated valuation models that process recent sales data. “It’s computer generated,” says Tomlinson. “It’s not intentional. All the sales of similar properties prior to, say, June 30 go into the computer, and the computer spits it out. No one has looked at it.”
Understanding Property Tax Rates
The assessed value of a property is then multiplied by the area’s tax rate. This rate might actually be several different local property taxes combined together—the town, city, or county might set one property tax rate, for example, the local school district might set another, and the local sewer district a third, all of which would be added together to determine the homeowner’s tax rate.
Property tax rates are often expressed as a “mill rate,” which is the number of dollars in taxes due per thousand dollars of property value. (For example, a mill rate of 10 means $10 in taxes for every $1,000 of assessed value—see “How to Calculate Your Property Tax Bill” below.)
Property tax rates vary dramatically from location to location, ranging from well over 2% in some counties in New Jersey, New York and Illinois to 0% in parts of Alaska, according to the Tax Foundation.
These tax rates vary in part because different municipalities spend very different amounts on services such as schools, and in part because some municipalities and school districts receive much greater financial support from their states than others.
For example, many municipalities in New Hampshire and Texas have relatively high property taxes, in part because these states have no state income taxes, so the state governments can’t afford to provide much financial support to local school systems. “Different states have different baskets of taxation,” says Tomlinson. “If they’re not collecting it in income tax, they’re getting it somewhere else.”
Common Property Tax Exemptions and Relief Programs
Many states and municipalities offer property tax exemptions that can reduce certain property owners’ tax bills. These exemptions might be available only to specific groups, such as veterans, active-duty military personnel, seniors, or the disabled, or they might be more widely available.
Types of exemptions include…
Homestead exemptions
Homestead exemptions can subtract some amount from the assessed value of a property that serves as the taxpayer’s primary residence, thus reducing that property’s tax bill.
These exemptions are a way for municipalities to charge local residents slightly less than they charge owners of vacation homes and investment properties.
Example: Maine’s Homestead Exemption can reduce the taxed value of a property by up to $25,000. To qualify, the home must be its owner’s permanent residence and have been in his or her possession for at least 12 months.
Circuit breaker programs
Circuit breaker programs reduce the property taxes due if those taxes would exceed some pre-determined percentage of the homeowner’s income.
Example: The Massachusetts Senior Circuit Breaker Tax Credit provides a tax credit worth up to $2,820 to qualifying homeowners age 65 and up whose income is below $75,000, or $112,000 for married couples filing jointly, as of 2025. (Program details for the 2026 tax year were not yet available as of June.)
Property tax deferrals
Property tax deferrals don’t lower the property taxes due, but they do allow qualifying homeowners to delay paying some or all of those taxes, potentially until the home is sold or the property owner dies.
Interest might accrue until the tax bill is paid. Example: Colorado’s Property Tax Deferral Program is available to certain seniors and active military personnel.
The website of your state’s department of revenue and/or your municipality’s tax assessor might list the tax exemption programs available in your area and provide details about the application process.
How to Calculate Your Property Tax Bill
The typical property tax calculation involves taking the assessed value of a home, as determined by the local tax assessor’s office, multiplying that figure by the area’s property tax rate, then subtracting any exemptions for which the homeowner has successfully applied.
Example: If the assessed value of a home is $400,000 and the local property tax rate is 1% (that’s a mill rate of 10), the homeowner’s annual tax bill would be $4,000, a figure that might or might not be split into two semi-annual bills. If this homeowner has successfully applied for a $1,000 exemption, the annual property taxes due would be reduced to $3,000.
Tips to Lower Your Property Tax Bill
The two primary paths homeowners have to lower their property tax bills are applying for exemptions and appealing tax assessments. Beyond that, the best way to lower property taxes is to relocate—move to a municipality with lower tax rates and/or to a less-valuable home.
Appealing Your Property Tax Assessment
Homeowners who suspect their municipality might be overvaluing their property have the right to appeal.
Tomlinson recommends reviewing the information the municipality has on file for the property. This usually can be done by accessing the property’s “appraisal card” (sometimes called an “assessor’s card”) though the municipality’s website—though, in some areas, a visit to the town or county assessor’s office might be necessary.
If any of the information on this card is inaccurate in a way that suggests the assessment might be too high, it could be worth appealing. “Most issues will be with square footage,” says Tomlinson. “If you have 2,000 square feet and they think you have 2,500 square feet, there’s a problem. Maybe the garage was torn down or something and they still have it as a house with a two-car garage…Most of them use the building permits, so if you got a building permit for an addition but never built it, they probably don’t know it wasn’t built.”
Your home’s assessment could be too high even if the details on file for it are correct if there’s something about the home or land that reduces its value compared to other superficially similar homes in the area.
If your home backs up to a railroad track, is in a flood zone, or is in need or expensive repairs, for example, it might be worth less than other area homes of similar size on similarly sized lots.
Warning: If the details on your property’s appraisal card suggests that it might be worth more than the appraisal suggests—perhaps a recent addition was not added to its square footage—then pursuing property tax appeals could be unwise.
If you recently received a notice from your municipality about a new assessment, this notice likely includes instructions for how to appeal. If not, contact the municipality’s assessor’s office to ask how to appeal.
Persistence is crucial with this appeals process, according to Tomlinson—if your initial appeal fails, appeal that rejection. It’s not uncommon for initial appeals to be denied simply because the local assessor ran out of time, not because the appeal lacked merit.
The further you pursue the matter up the appeals ladder, the greater the odds that you’ll either win an appeal or be offered a settlement by an assessor who wants to be done with the process. “I always want to appeal all the way to the state level,” says Tomlinson. “A few days before the state hearing, they’ll usually call you and negotiate a lower number.”
Helpful: The appeals process involves an in-person hearing at which the assessor will defend his assessment of your property by comparing it to comparable local homes. Contact the assessor prior to this hearing, ask for the comps he intends to cite, then look for reasons why your home is less valuable than those properties.
