🏠 How Are Property Taxes Calculated in 2026
Complete Guide to Assessed Values, Mill Rates, Exemptions & Examples
📋 Table of Contents
🎯 Key Takeaway
Property Tax = Assessed Value × Tax Rate. Your assessed value is typically a percentage of market value (assessment ratio), and the tax rate is set by local governments, often expressed in "mills" (1 mill = $1 per $1,000 of assessed value).
1. Property Tax Overview
Property taxes are local taxes levied on real estate by counties, cities, school districts, and special districts. They're the primary funding source for local services like:
- Public schools — Often 40-60% of property tax revenue
- Police and fire departments — Emergency services
- Roads and infrastructure — Maintenance and repairs
- Parks and recreation — Public spaces
- Libraries and public facilities — Community services
💡 Key Facts About Property Taxes
- Property taxes are ad valorem taxes (based on value)
- Rates and assessment methods vary significantly by location
- Typically paid annually or semi-annually
- Can be paid through mortgage escrow or directly
- Deductible on federal taxes (up to $10,000 SALT limit)
2. Components of Property Tax
Understanding property tax requires knowing these key components:
2.1 Market Value
The market value is what your property would sell for on the open market. Assessors determine this using:
- Sales comparison approach — Recent sales of similar properties
- Cost approach — Land value + replacement cost − depreciation
- Income approach — For rental/commercial properties
2.2 Assessment Ratio
Many jurisdictions assess property at a percentage of market value:
- Some states assess at 100% of market value
- Others use 10%, 25%, 50%, or other ratios
- This ratio is called the assessment ratio or assessment rate
2.3 Mill Rate / Tax Rate
The mill rate (or millage rate) is the tax rate per $1,000 of assessed value:
- 1 mill = $1 tax per $1,000 of assessed value
- A 25 mill rate means $25 per $1,000 assessed
- Rates are set annually by taxing authorities
3. Property Tax Formulas
3.1 Basic Property Tax Formula
📐 Formula: Property Tax
Tax Rate may be expressed as a decimal, percentage, or mills
3.2 Calculate Assessed Value
📐 Formula: Assessed Value
Assessment ratio varies by jurisdiction (e.g., 100%, 80%, 50%)
3.3 Using Mill Rate
📐 Formula: Tax Using Mills
1 mill = $1 per $1,000 of assessed value
3.4 Calculate Effective Tax Rate
📐 Formula: Effective Tax Rate
This shows the true tax rate relative to market value
3.5 Complete Calculation
📐 Formula: Full Property Tax Calculation
Combine all components in one calculation
4. Property Tax Calculator
Estimate your annual property tax based on your property's value and local tax rates:
5. How Properties Are Assessed
5.1 The Assessment Process
- Data Collection: Assessor gathers property characteristics (size, age, features)
- Market Analysis: Review recent sales of comparable properties
- Value Estimation: Apply valuation methods to determine market value
- Assessment Ratio: Apply local ratio to get assessed value
- Exemptions: Subtract any applicable exemptions
- Tax Calculation: Multiply taxable value by tax rate
5.2 Assessment Frequency
- Annual: Some states reassess every year
- Biennial: Every 2 years
- Triennial: Every 3 years
- Quinquennial: Every 5 years or longer
⚠️ Right to Appeal
If you believe your assessment is too high, you have the right to appeal. Most jurisdictions have a formal appeals process with deadlines (typically 30-90 days after assessment notice). Gather evidence like recent comparable sales, property condition issues, or errors in the assessment.
6. Worked Examples
Example 1: Basic Property Tax Calculation
📝 Problem
A home has a market value of $350,000. The assessment ratio is 100%, and the tax rate is 1.5%. What is the annual property tax?
Assessed = $350,000 × 100% = $350,000
Tax = $350,000 × 1.5% = $350,000 × 0.015 = $5,250
Answer: Annual property tax is $5,250 ($437.50/month).
Example 2: Using Mill Rate
📝 Problem
Property market value is $400,000. Assessment ratio is 80%, and the mill rate is 25 mills. Calculate the tax.
Assessed = $400,000 × 80% = $320,000
Tax = ($320,000 ÷ 1,000) × 25 = 320 × 25 = $8,000
Effective = ($8,000 ÷ $400,000) × 100 = 2.0%
Answer: Annual tax is $8,000. Effective tax rate is 2.0%.
Example 3: With Homestead Exemption
📝 Problem
Home value is $300,000, assessed at 100%. Tax rate is 2%. Homeowner qualifies for a $50,000 homestead exemption.
Assessed = $300,000 × 100% = $300,000
Taxable = $300,000 − $50,000 = $250,000
Tax = $250,000 × 2% = $5,000
Without exemption: $300,000 × 2% = $6,000
Savings = $6,000 − $5,000 = $1,000
Answer: With the exemption, tax is $5,000. Savings: $1,000/year.
7. Common Exemptions & Reductions
💰 Property Tax Exemptions
- Homestead Exemption: Reduces taxable value for primary residence ($25,000–$100,000+)
- Senior Citizen Exemption: Additional reduction for homeowners 65+
- Veteran Exemption: Discounts for military veterans (varies by state)
- Disability Exemption: For homeowners with qualifying disabilities
- Agricultural Exemption: Reduced rates for farmland
- Historic Property: Incentives for preserving historic buildings
- Solar/Energy: Exemptions for renewable energy installations
Assessment Caps & Limits
Some states limit how much assessments can increase annually:
- California (Prop 13): Limits increases to 2% per year
- Florida (Save Our Homes): 3% annual cap on homestead properties
- Texas: 10% annual cap on homestead appraisal increases
8. Property Tax Rates by State
Property tax rates vary significantly by state. Here are the 2026 effective rates:
| State | Effective Rate | Avg. Tax on $350K Home |
|---|---|---|
| New Jersey | 2.21% | $7,735 |
| Illinois | 2.08% | $7,280 |
| Connecticut | 1.96% | $6,860 |
| New Hampshire | 1.93% | $6,755 |
| Texas | 1.68% | $5,880 |
| New York | 1.62% | $5,670 |
| Ohio | 1.52% | $5,320 |
| Florida | 0.86% | $3,010 |
| California | 0.71% | $2,485 |
| Colorado | 0.51% | $1,785 |
| Arizona | 0.62% | $2,170 |
| Hawaii | 0.29% | $1,015 |
⚠️ Local Variation
These are state averages. Actual rates vary significantly by county, city, and school district. Urban areas typically have higher rates than rural areas. Always check your local assessor's office for exact rates.
