Real estate taxes (also called property taxes) are what help keep local services—like schools, roads, and public safety—up and running. They aren’t optional; it’s how your community stays funded. So even though paying them isn’t anyone’s favorite thing, that money is going toward important services like your local fire department, keeping streetlights on, and fixing up the roads you drive on every day. It’s a necessary part of homeownership.
How are property taxes calculated?
Here’s how it works: property taxes are based on the assessed value of your home and the local tax rate. For example, if your home is worth $400,000 and you live in Houston, where the tax rate is about 2.31%, you’ll owe $9,240 a year. Now compare that to Seattle, where the rate is lower—around 0.93%—you’d only owe $3,720 annually. It might seem like a big difference, but keep in mind that areas with higher property taxes often have lower income or sales taxes, so it can balance out over time.
Are property taxes the same everywhere?
Nope. Property tax rates vary depending on where you live. Here’s a chart that breaks down how different rates can affect your mortgage payments.
| City | Estimated Annual Property Tax |
| Seattle, WA | $3,780 |
| Austin, TX | $8,100 |
| Hartford, CT | $8,100 |
| Atlanta, GA | $4,050 |
| Denver, CO | $2,700 |
| Lansing, MI | $7,200 |
| Washington, DC | $3,915 |
| Baton Rouge, LA | $2,475 |
As shown in the chart, property taxes can significantly impact your housing costs. For instance, in Austin or Hartford, the annual property tax on a $450,000 home would be over $8,000, translating to a monthly payment of nearly $700. On the other hand, in cities like Denver or Baton Rouge, the annual tax burden is considerably lower, at around $2,700, resulting in a monthly payment of just over $200.
How often are property taxes assessed?
Depends on your city. In Seattle, assessments are annual, so your property’s value is reevaluated every year. But somewhere like Atlanta reassesses every three years. That means if home prices shoot up in a hot market, you might not feel the pain right away—but when that reassessment happens, expect a bigger bill. Always worth checking how your local system works.
What’s the difference between assessed value and market value?
Assessed value is what your local government says your home is worth for tax purposes. Market value is what someone’s willing to actually pay for it. For example, your home might have a market value of $400,000, but an assessed value of $350,000. This is good news for your tax bill, especially if you live in a competitive market.
How can I find out the assessed value of a property?
Most counties have websites where you can check the assessed value of your property. In. Seattle you’d verify through the King County website. Keeping an eye on it is a smart move, especially in a fast-changing market.
How do property taxes factor into my closing costs?
Property taxes are an important part of your closing costs because they typically need to be paid upfront. When you close on a home, the lender will usually require you to prepay a portion of the property taxes for the year. This ensures that the taxes are current and helps avoid any potential liens on the property. The amount you’ll need to pay depends on when you close—if you’re closing halfway through the year, you might need to pay six months’ worth of taxes, for example.
Additionally, lenders often require you to set up an escrow account to cover future property taxes and homeowners insurance. They’ll collect a few months’ worth of taxes upfront at closing, and then, moving forward, you’ll pay monthly installments into that account along with your mortgage payment. This way, when your property taxes are due, the money is already set aside.
Will property taxes change if I am buying a primary residence versus an investment property?
Yes, property taxes can change depending on whether you’re buying a primary residence or an investment property. In many areas, primary residences often qualify for certain tax benefits or exemptions, like a homestead exemption, which can lower the amount you owe in property taxes. These exemptions are meant to help homeowners by reducing the taxable value of their property.
On the other hand, investment properties usually don’t qualify for these exemptions, which means you might end up paying a higher rate on the full assessed value of the home. Some cities and states also have separate tax rates for investment properties, so it’s important to check local laws to see how your property will be taxed.
Does the buyer or the seller pay property taxes in the month of a home closing?
Property taxes are split between the buyer and seller based on the closing date. The seller covers taxes up to the closing day, and the buyer takes over from there. The seller’s portion is typically credited to the buyer at closing, and then the buyer pays the full tax bill when it’s due.
How much do property taxes typically increase annually?
The amount property taxes increase each year varies by location and local policies, but a typical increase is around 1-3% annually. Some areas have caps or limits on how much taxes can rise each year, especially for primary residences. However, if there’s a significant jump in property value or a local tax rate change, you might see a larger increase. It’s a good idea to check with your local tax assessor to get a better sense of the average increases in your area.
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