If you are planning to buy or own a home in the United States, property tax is something you definitely need to consider. It’s more than just a simple ownership tax, and the rate and overall burden can vary greatly by region.
In this article, we’ll go over all the essential information you need to know when buying real estate in the U.S., from the basic structure of property tax to regional differences and available exemptions.
What Is Property Tax?
Property tax is a tax that each U.S. state and county (local government) charges real estate owners every year. It applies to all types of residential properties, including single-family homes, condos, and townhomes, and is used to fund local public services such as schools, roads, police, and fire departments.
How Is Property Tax Calculated?
Property taxes are generally calculated as follows:
- Assessed Value The taxable value of the home determined by the local government. It may differ from the actual purchase price or current market value.
- Exemptions Owner-occupants, seniors, veterans, and certain other groups may qualify for deductions from the assessed value.
- Tax Rate Typically around 1–2% (varies by region).
Property Tax = (Assessed Value – Exemptions) × Tax Rate
Average Property Tax by Major U.S. Regions (as of 2025)
| State/City | Average Effective Tax Rate (%) | Median Annual Property Tax | Notes |
|---|---|---|---|
| New Jersey | 2.46% | $9,900+ | Among the highest in the U.S. |
| Illinois | 2.29% | $5,700+ | High in both major cities and suburbs |
| California | 0.81% | $5,200–$9,500 | High housing prices lead to a large total tax bill |
| Texas | 1.90% | $3,500–$6,000 | High in both tax rates and total amount |
| Georgia | 0.95% | $2,528 (Atlanta) | Around the average for the Southern U.S. |
| Florida | 0.89% | $2,300–$4,000 | Relatively low tax rates with various exemption programs |
| Hawaii | 0.29% | $1,500–$2,500 | Lowest rates, but very high housing prices |
| Alabama | 0.41% | $1,091 (Birmingham) | Among the lowest in the U.S. |
Tip: Even for homes with similar values, property tax can differ by 2–5× depending on the location.
What Exemptions Are Available for Owner-Occupants?
- Homestead Exemption If the property is one’s primary residence, a certain amount of the assessed value may be exempt.
- Senior Exemption For homeowners aged 65 or older, a portion or even all of the tax may be reduced or exempt (often subject to income limits).
- Veterans and Disabled Exemptions Additional exemptions may be available based on veteran status or disability rating.
➕ These exemptions aren’t applied automatically; you need to apply for them, and in some areas, you may need to renew them annually.
Payment Methods and Appeals
- Property tax is typically paid in one to four installments per year, depending on the jurisdiction.
- If you have a mortgage, payments are often made automatically through an escrow account managed by your lender.
- You may file an appeal with the local assessor’s office if you believe your assessed value has been set excessively high.
Frequently Asked Questions (FAQ)
Q1. Does property tax go up as soon as I buy a home?
Yes. In many states and counties, when a property is sold, the assessed value is reset based on the actual purchase price paid by the new owner.As a result, property tax can increase significantly compared to what the previous owner was paying.
Q2. How do I receive exemptions?
Owner-occupants (Homestead Exemption), seniors, veterans, and disabled persons may apply for exemptions.They are not applied automatically, so make sure to check the eligibility criteria and application process for each state and county.
Q3. Will property tax increase if I remodel or add onto the house?
Yes. Adding rooms, expanding the building, or doing major remodeling can trigger a reassessment that increases the assessed value, and therefore your property tax.Significant improvements must be reported to the local government, and failing to do so may result in penalties.
Q4. What can I do if I think my property tax bill is too high?|
If you believe the assessed value is higher than the actual market value, you can file an Assessment Appeal. By submitting supporting documents such as appraisal report or recent comparable sales, you may have the assessed value and your tax bill reduced.
Q5. What happens if I don’t pay my property taxes?
Unpaid property tax incurs late fees and interest. Long-term delinquency can result in a lien being placed on the property. In the worst case, the home may be seized and sold at a tax auction.
Q6. When I sell my home, who is responsible for the property tax?
In many states, the person who owns the home as of a specific “assessment date” (e.g., January 1 or June 1) is responsible for that year’s property tax.At closing, the seller and buyer usually prorate the tax based on the date of transfer so that each party pays their fair share.
Don’t Forget to Check the Loan Limit by Region
In addition to property tax, local mortgage loan limit is crucial when planning your home purchase budget. Government-backed loan limits vary by region, so confirming the applicable loan limit in advance can help you build a more stable homebuying plan.
Key Takeaways About U.S. Property Tax
- Your tax bill is essentially: (Assessed Value × Tax Rate) – Exemptions
- Tax rates and burdens vary significantly by region; even homes with similar prices can have property tax differing by thousands of dollars per year.
- Exemption programs require applications and may depend on factors such as income, age, and veteran status.
- Property tax is a major part of the ongoing costs of homeownership and is directly tied to your asset value.
- Before home purchase, you should always check both property tax and local loan limits to manage risks.
Planning to Buy a Home in the U.S.?
On Loaning.ai, we provide up-to-date guides on every step of U.S. mortgage and home buying, fully updated for 2025. Check out Loaning’s home purchase guide and get the support you need for your U.S. homebuying plans.
