How to Calculate Property Tax: Complete Guide 2026
Property tax can be confusing, but the calculation is straightforward: multiply your home’s assessed value by the local tax rate. In this guide, we’ll walk you through the exact formula, show real-world examples, and explain how assessed values and exemptions affect your bill.
Property Tax Formula
The basic property tax formula is simple, but understanding each component is crucial:
Property Tax = (Assessed Value × Tax Rate) ÷ 100
Or expressed as: Annual Tax = Market Value × Assessment Ratio × Tax Rate
Formula Components
- Assessed Value: The value a county assessor assigns to your property (usually 15%-100% of market value, depending on your state)
- Tax Rate: Set by local governments as a percentage (e.g., 1.2%) or per $1,000 of assessed value (e.g., $12 per $1,000)
- Assessment Ratio: The percentage of market value used to calculate assessed value (varies by state and property type)
Step-by-Step Example
Let’s calculate property tax for a $350,000 home in Texas with a 1.1% tax rate:
Given Information
- • Market Value: $350,000
- • Assessment Ratio: 100% (Texas)
- • Tax Rate: 1.1%
Calculation
Assessed Value = $350,000 × 100% = $350,000
Tax Rate = 1.1%
$350,000 × 0.011 = $3,850
Annual Property Tax: $3,850
💡 Tip: Monthly property tax = $3,850 ÷ 12 = $320.83 per month. If you have a mortgage, this might be included in your escrow account and paid quarterly by your lender.
State-by-State Property Tax Rates
Property tax rates vary dramatically by state. Here are the states with the highest and lowest effective rates in 2026:
| Highest Rate States | Effective Rate | Lowest Rate States | Effective Rate |
|---|---|---|---|
| New Jersey | 0.85% | Hawaii | 0.27% |
| Connecticut | 0.78% | Alabama | 0.41% |
| Illinois | 0.74% | Louisiana | 0.45% |
| Vermont | 0.71% | Mississippi | 0.51% |
| New Hampshire | 0.70% | South Carolina | 0.52% |
Note: These are effective property tax rates (total property taxes as a percentage of median home value). Statutory rates may differ. For example, New Jersey’s statutory rate is much lower, but assessments are so high that the effective rate is highest in the nation.
How Assessed Value Is Determined
Assessed value is the foundation of your property tax calculation. Assessors use three main approaches:
1. Sales Comparison Approach
The most common method for residential homes. Assessors look at recent sales of similar properties in your area and adjust for differences (size, condition, location). A $350,000 home is valued at $350,000 if comparable homes recently sold at that price’.
2. Cost Approach
Used for unique properties or new construction. Assessors calculate the cost to rebuild the home (materials + labor), then subtract depreciation based on age and condition. Estimated reconstruction cost of $250,000 minus 20% depreciation = $200,000 assessed value’.
3. Income Approach
Used for investment properties and commercial real estate. Based on the income the property generates. A rental house earning $20,000/year in net income might be valued at $250,000-$300,000 based on capitalization rate’.
Property Tax Exemptions & Deductions
Many homeowners qualify for exemptions that reduce their assessed value or tax bill:
Homestead Exemption
Reduces assessed value by a fixed amount ($25,000-$50,000) or percentage for your primary residence. Available in 42 states. Can save $300-$3,000+ annually’.
Veteran’s Exemption
Disabled veterans often qualify for full or partial tax exemptions. Benefits vary by state and disability rating. Some states offer 100% exemptions for 100% disabled vets.
Senior Exemption
Homeowners age 65+ may qualify for reduced taxes or frozen assessments. 30+ states offer senior exemptions ranging from $500-$5,000+ annually’.
Disabled Person Exemption
Various states offer exemptions for disabled homeowners. Requirements vary (mobility impairment, blindness, developmental disability). Can provide $1,000-$5,000 in annual tax savings’.
💡 Check with your county assessor’s office to see what exemptions you qualify for.
How to Appeal Your Assessment
If you believe your assessed value is too high, you can appeal:
- Review Your Tax Bill — Compare your assessed value to recent sales of similar homes. If your home is assessed significantly higher, you have grounds for an appeal’.
- Gather Evidence — Collect comparable sales data (usually 3-5 similar homes sold within 6 months), get a professional appraisal, document any property damage or deferred maintenance.
- Contact Assessor — Contact your county assessor’s office to request a reassessment. Many will adjust the value if you present evidence.
- File Formal Appeal — If the assessor denies your request, file a formal appeal with the county board of equalization. Deadlines vary (typically 30-60 days from your tax bill).
- Attend Hearing — Present your evidence to the appeals board. A successful appeal can reduce your assessed value by 5-20%, saving hundreds per year.
📝 Success Rate: About 20-30% of property tax appeals are successful. If your home has decreased in value since assessment or similar homes nearby have lower assessments, your chances improve significantly.
Common Mistakes to Avoid
Assuming Assessed Value = Market Value
Assessment ratios vary by state (15%-100%). In some states, assessed value is much lower than market value. Check your state’s assessment ratio before calculating taxes.
Ignoring Available Exemptions
Many homeowners don’t claim exemptions they qualify for. Check with your assessor about homestead, senior, disabled, or veteran exemptions—you could save thousands.
Missing Appeal Deadlines
Appeals must be filed within specific deadlines (usually 30-60 days). Missing the deadline means you cannot appeal that year’s assessment.
Forgetting the SALT Deduction Limit
Property taxes over $10,000/year cannot all be deducted federally (2026 SALT cap). You’ll lose the deduction benefit on amounts above $10,000 if you claim the standard deduction instead.
Not Budgeting for Increases
Property taxes increase 2-4% annually on average due to new assessments and rate changes. Budget accordingly when buying, or you may face payment shock.
Frequently Asked Questions
Property Tax = (Assessed Value × Tax Rate) ÷ 100. For example, a $300,000 home assessed at 100% of value with a 1.2% tax rate = $300,000 × 0.012 = $3,600 annual property tax.
Property Tax = (Assessed Value × Tax Rate) ÷ 100. For example, a $300,000 home assessed at 100% of value with a 1.2% tax rate = $300,000 × 0.012 = $3,600 annual property tax.
Assessed value is determined by local assessors using three methods
Assessed value is determined by local assessors using three methods: the sales comparison approach (comparing to similar homes), cost approach (rebuilding cost minus depreciation), or income approach. Most homes are reassessed every 1-5 years depending on your state.
States with highest effective property tax rates (2026)
States with highest effective property tax rates (2026): New Jersey (0.85%), Connecticut (0.78%), Illinois (0.74%), Vermont (0.71%), and New Hampshire (0.70%). These rates are based on median home values.
Property tax is based on real estate value and paid annually to local/county governments. Income tax is based on earnings and paid to federal and state governments. They are separate taxes calculated differently.
Property tax is based on real estate value and paid annually to local/county governments. Income tax is based on earnings and paid to federal and state governments. They are separate taxes calculated differently.
Yes, up to $10,000 total for all state and local taxes (SALT limit) as of 2026. This includes property tax, state income tax, and state sales tax combined. You must itemize deductions to claim this.
Yes, up to $10,000 total for all state and local taxes (SALT limit) as of 2026. This includes property tax, state income tax, and state sales tax combined. You must itemize deductions to claim this.
Homestead exemptions reduce the assessed value of your primary residence, lowering your property tax bill. They're available in 42 states and can save homeowners $500-$3,000+ annually depending on state and home value.
Homestead exemptions reduce the assessed value of your primary residence, lowering your property tax bill. They're available in 42 states and can save homeowners $500-$3,000+ annually depending on state and home value.
Contact your county assessor's office to request a reassessment. If denied, you can file a formal appeal (deadlines vary by state, typically 30-60 days). Gather comparable sales data and have your home professionally appraised if necessary.
Contact your county assessor's office to request a reassessment. If denied, you can file a formal appeal (deadlines vary by state, typically 30-60 days). Gather comparable sales data and have your home professionally appraised if necessary.
Local government funding needs, school district budget, community infrastructure investment, county debt service, and special assessments (for roads, water systems, etc.) all affect property tax rates. They vary significantly by location.
Local government funding needs, school district budget, community infrastructure investment, county debt service, and special assessments (for roads, water systems, etc.) all affect property tax rates. They vary significantly by location.
Property tax may be included in an escrow account as part of your mortgage payment. Your lender collects taxes and insurance quarterly and pays them on your behalf to ensure they're paid on time.
Property tax may be included in an escrow account as part of your mortgage payment. Your lender collects taxes and insurance quarterly and pays them on your behalf to ensure they're paid on time.
The national average effective property tax rate is 0.72% of home value in 2026. However, this varies widely
The national average effective property tax rate is 0.72% of home value in 2026. However, this varies widely: from 0.27% in Hawaii to 2.16% in some rural Texas counties. Your specific rate depends on your location.
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