What are property taxes?

Local governments raise money through property taxes to provide important public services in the community. A good chunk of the money collected from property taxes goes to your local police and fire departments, the schools your kids attend and maintenance for the roads you drive on.

Do I really need to pay property taxes?

Everyone who owns property has to pay property taxes. Even if you own other types of properties, youʼll pay property taxes on those too. But if youʼre renting an apartment or something like an office space, you donʼt have to worry about property taxes.

How do I calculate what I owe in property tax?

The amount you pay in property tax is based on two things: your local governmentʼs tax rate and your propertyʼs assessed value. All you have to do is take your homeʼs assessed value and multiply it by the tax rate. (ASSESSED VALUE x PROPERTY TAX RATE = PROPERTY TAX)

Assessed Value

The assessed value is not the same as the price you paid for the house or how much you can sell it for, which is called the “appraised” or “market” value. Your local governmentʼs tax or property assessor sets the assessed value for your house, and itʼs usually lower than the market value.

Property Tax Rate

Since local governments set property tax rates, the amount you pay depends on where you live.

How much is too much when it comes to property taxes?

When it comes to buying a house, it is recommended that your monthly mortgage payment–including property taxes–should be around 25% of your take-home pay.

How do I pay my property taxes?

The typical mortgage payment includes principal, interest, homeownerʼs insurance and property taxes.

Do I still have to pay property taxes after I pay off my house?

You still have to pay property taxes on your house even after itʼs paid for. But from then on, you wonʼt pay those taxes to a mortgage lender. Now itʼs on you to pay property taxes directly to your local government. The best way to handle property taxes on your own is to plan ahead. Calculate what youʼll owe in property tax each year, divide it into monthly payments and set that money aside each month.

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