Understanding Property Taxes and How to Plan for Them

When buying a home, many buyers focus on the mortgage payment, but property taxes are an important ongoing cost that can significantly impact your monthly budget. Whether you're a first-time buyer or an experienced homeowner, understanding how property taxes work (and how to plan for them) is essential to avoid surprises.

What Are Property Taxes?

Property taxes are annual taxes paid by homeowners to local governments. These taxes fund public services like schools, road maintenance, emergency services, and parks. The amount you owe is based on the assessed value of your property and your local tax rate.

How Property Taxes Are Calculated

The basic formula is:

Assessed Value of Your Home × Local Tax Rate = Annual Property Tax

• The assessed value is typically determined by your local assessor and may be updated annually or biannually.

• The tax rate is set by your local government and can vary widely depending on where you live.

For example:

• If your home is assessed at $300,000 and your local tax rate is 1.25%, your annual property tax would be $3,750.

When Are Property Taxes Paid?

In most areas, property taxes are due once or twice a year. However, if you have a mortgage, your lender may collect a portion of your annual taxes monthly through escrow, then pay them on your behalf when due.

What’s Included in Escrow?

Your monthly mortgage payment may include:

• Principal

• Interest

• Homeowners insurance

• Property taxes (through escrow)

This helps spread the cost over the year, so you don’t have to pay a lump sum when taxes are due.

How to Plan for Property Taxes

1. Know Your Local Tax Rate

   Look up the property tax rate in your area so you can estimate annual costs ahead of time.

2. Review the Property’s Tax History

   Ask your agent or local assessor for past property tax bills. This gives you an idea of potential increases.

3. Understand Reassessments

   Property values are reassessed periodically. Major renovations or market changes could raise your home's assessed value—and your tax bill.

4. Budget for Increases

   Even if your taxes are manageable now, build some flexibility into your budget to account for future increases.

5. Explore Tax Exemptions or Discounts

   Some homeowners may qualify for exemptions (e.g., seniors, veterans, or first-time buyers). Check with your local assessor’s office.

Need Help Estimating Your Property Taxes?

If you're buying or selling a home and want to understand how property taxes may affect your budget or resale value, I’d be happy to walk you through it.

Let’s talk about your next move, with no surprises.