Property tax feels mysterious, but the formula is simple. Every US property-tax bill comes down to two things the government decides — what your property is worth for tax purposes, and the rate — minus any breaks you qualify for.
The formula. annual property tax = (assessed value − exemptions) × local tax rate. Across the US the effective rate (tax ÷ market value) averages about 1.08% (Census ACS, 2023 5-year). See your county.
Step 1: the assessed value
Your county assessor sets an assessed value for your property, usually once a year or every few years. This is not always the price you’d sell for:
- Some states assess at market value; others at a fixed assessment ratio (say 10% or 80% of market value).
- Many states cap how fast assessed value can rise per year (for example a 2–3% annual cap), so long-time owners can have assessed values well below market.
Step 2: subtract exemptions
Exemptions reduce the taxable value. The most common is the homestead exemption for your primary residence; there are also senior, veteran and disability exemptions. Read the guide to exemptions.
Step 3: apply the tax rate (mill rate)
Your local tax rate is the sum of rates from every taxing body that covers your parcel — county, city/town, school district, and special districts (fire, water, library). It is often quoted in mills (dollars per $1,000 of taxable value).
| Rate as quoted | Means | Tax on $300,000 taxable value |
|---|---|---|
| 25 mills | $25 per $1,000 (2.5%) | $7,500 |
| 12 mills | $12 per $1,000 (1.2%) | $3,600 |
| 1.08% (US avg effective) | $10.80 per $1,000 | $3,240 |
Effective rate vs mill rate explains why the rate you’re quoted and the rate you actually pay can differ.
Worked example
A home with a $350,000 assessed value, a $50,000 homestead exemption, and a combined 18-mill rate:
- Taxable value = $350,000 − $50,000 = $300,000
- Tax = $300,000 × (18 ÷ 1,000) = $5,400/year
Sanity-check your own bill
Compute your effective rate: take last year’s bill and divide by your home’s current market value. Compare it to your county’s median effective rate. If yours is far higher, you may be over-assessed — here’s how to appeal. Use the estimator to model changes in value or rate.