Property tax bills are calculated from two numbers that most homeowners never think about separately: assessed value (a figure set by your local tax assessor, which may lag behind or differ from market value) and your local tax rate (often called a millage rate, expressed as a percentage or dollars per $1,000 of assessed value).
Assessed value isn't always the same as what your home would actually sell for today. Many jurisdictions reassess only periodically — sometimes annually, sometimes every few years — which means assessed value can meaningfully lag behind fast-moving market value, in either direction. Your tax bill is based on whatever the assessment says, not the current market price.
How Property Tax Is Calculated
Annual Property Tax = Assessed Value × Tax Rate
Monthly Equivalent = Annual Property Tax ÷ 12
For homeowners with a mortgage, property tax is often collected monthly through an escrow account bundled into the total mortgage payment, even though the tax itself is typically paid annually or semi-annually by the mortgage servicer on the homeowner's behalf.
A Worked Example
On a home with an assessed value of $350,000 and a local tax rate of 1.1%, annual property tax comes to $3,850, or about $321 per month if paid through an escrow account alongside the mortgage. In a higher-tax area with a rate closer to 2.2%, the same assessed value produces $7,700 annually — more than double, on an identical home value, purely due to the local tax rate.
Common Mistakes to Avoid
- Confusing assessed value with market value: many jurisdictions assess homes at a percentage of market value, or on a delayed schedule — check your specific area's assessment method.
- Forgetting property tax can increase even if you don't move: reassessments, local budget changes, or new levies can all raise your property tax bill over time.
- Not appealing an assessment that seems too high: most jurisdictions have a formal appeal process if you believe your assessed value is inaccurate relative to comparable homes.
- Ignoring property tax when comparing homes in different areas: two similarly priced homes in different towns can have very different total housing costs once property tax rates are factored in.
Bottom Line
Property tax depends on both your specific assessed value and your local rate — two numbers that vary independently. Use a Property Tax Calculator to estimate your annual and monthly property tax bill from your home's assessed value and local rate.