Property Tax Calculator
Work out what property tax really costs each month, and project it forward — including the effect of a cap on annual increases.
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The number most buyers forget
Property tax is the largest ongoing cost of owning a home that has nothing to do with the mortgage, and it is the one buyers most often overlook. It is charged by local government, it never goes away, and it usually rises. On a 400,000 dollar home at 1.2 percent it is 4,800 dollars a year — 400 dollars a month, which is more than most people spend on insurance.
The calculation has one step that trips people up: assessed value is not market value. Many jurisdictions assess at a fraction of what the home would sell for, sometimes 10 or 20 percent, and then apply a higher nominal rate to that smaller figure. Comparing a rate in one state with a rate in another without checking the assessment ratio tells you almost nothing.
Exemptions then reduce the taxable figure before the rate applies. Homestead exemptions, senior exemptions and veteran exemptions are common, and they are applied to the assessed value rather than to the tax bill, so their value scales with the rate. A 25,000 dollar exemption at a 1.2 percent rate saves 300 dollars a year.
The feature that matters most over time is a cap on annual increases. California limits increases to 2 percent a year, and several other states have similar rules. A cap turns property tax into something predictable, and it protects long-term owners from the tax bill rising as fast as the market. In the example on this page a 2 percent cap against 5 percent market growth saves 7,815 dollars over ten years — and far more over thirty.
How property tax is calculated
Assessed value first, then the exemption, then the rate. The projection applies the smaller of your growth assumption and any cap.
| Symbol | Meaning |
|---|---|
Market value |
What the property would sell for |
Assessment ratio |
The share of market value that is taxed, set locally |
Exemption |
A fixed deduction, applied before the rate |
Rate |
The tax rate applied to the taxable value, expressed as a percent |
Cap |
A limit on how fast the taxable value may rise each year |
Where a cap exists it usually limits the growth of the assessed value rather than the tax itself, and it often resets when the property changes hands. That is why two identical houses on the same street can carry very different tax bills.
Worked example: 400,000 dollar home at 1.2 percent
Full assessment, no exemption, 5 percent market growth with a 2 percent cap on increases, projected over 10 years.
| Figure | Result |
|---|---|
| Assessed value | $400,000.00 |
| Taxable value | $400,000.00 |
| Tax in year 1 | $4,800.00 |
| Monthly equivalent | $400.00 |
| Per day | $13.15 |
| Growth actually applied | 2.00% (the cap) |
| Tax in year 10 | $5,736.44 |
| Increase over 10 years | $936.44 (19.5%) |
| Total tax over 10 years | $52,558.66 |
| Saved by the 2% cap | $7,815.22 |
The cap does the heavy lifting here. Market values rising at 5 percent would have pushed the bill to 5,997 dollars by year ten; the 2 percent cap holds it at 5,736. Over ten years that is 7,815 dollars saved, and over a thirty-year ownership it compounds into a figure larger than most people's annual income.
Estimates only. Your lender's figures may differ because of fees, escrow and rounding.
Keeping property tax under control
Check the assessment ratio, not just the rate
A 2 percent rate on 50 percent assessment is cheaper than a 1.2 percent rate on 100 percent. Comparing headline rates across states without checking the ratio is the most common mistake in property tax research.
Claim every exemption you qualify for
Homestead, senior, veteran and disability exemptions are frequently unclaimed because nobody applies automatically. They are worth real money: a 25,000 dollar exemption at a 1.2 percent rate is 300 dollars a year, every year, for as long as you own the home.
Appeal if the assessment looks wrong
Assessments are often based on mass valuations rather than an inspection of your property, and errors are common. Find recent comparable sales, check the deadline for appeals, and file if the figure looks high. The cost of trying is usually nothing.
Know whether your cap survives a sale
Many caps reset to market value when the property changes hands, which means your tax bill can jump the year after you buy. Ask what the previous owner paid and what the assessor will use as the new basis — the difference can be thousands a year.
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Frequently asked questions
How is property tax calculated?
Market value is multiplied by the local assessment ratio to get the assessed value, any exemption is deducted, and the tax rate is applied to what remains. A 400,000 dollar home assessed at 100 percent with no exemption at a 1.2 percent rate pays 4,800 dollars a year, or 400 dollars a month.
Why is my property tax different from my neighbour's?
Usually because of when the property was last assessed or sold. Where annual increases are capped, the cap often resets at sale, so a house bought last year can be taxed on a much higher basis than an identical one owned for twenty years. Exemptions also differ between households.
What is an assessment ratio?
The share of market value that a jurisdiction taxes. Some assess at 100 percent, others at 10 or 20 percent and then apply a correspondingly higher nominal rate. It exists mainly so that rates can be raised without the headline number appearing to change.
Do property taxes go up every year?
Usually yes, though not always by the same amount. Where a cap applies, the increase is limited to the cap regardless of how fast the market moves. Where there is no cap, the bill follows the assessment. The projection above shows both cases.
Are property taxes deductible?
In the United States, state and local taxes including property tax are deductible if you itemise, subject to a combined cap that changes with legislation. Many households take the standard deduction instead and get no benefit at all. This calculator does not model deductions.