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What to know about property taxes

If you’re a homeowner, you will likely be required to pay property taxes as long as you own your home. It’s helpful to understand what property taxes are, how they’re paid, and how they could change over time. You should also know that help may be available if paying property taxes becomes a financial strain.

What are property taxes?

Property taxes are charged by local governments where your home is located — usually at the county level. The taxes are then used to fund public services, like schools and roads.

The amount you owe in property taxes is based on the value of your property including the land and the actual structures. This value is assessed each year by the local government. If the value goes up, your property taxes may increase too. But exemptions and tax credits may be available to reduce your home’s assessed value — and thus reduce how much you pay in taxes.

Common exemptions include:

  • Homestead exemptions
  • Disability exemptions
  • Low-income exemptions
  • Senior exemptions
  • Veteran exemptions

Available exemptions vary by location, so check with your local government or a tax professional to learn more.

How are property taxes paid?

You can pay your property taxes directly to the relevant government agency, or you can pay into an escrow account overseen by your mortgage servicer.

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If you elect to use an escrow account, you pay a portion of your property taxes with each of your monthly mortgage payments. Then the collected taxes are paid to the government one or more times each year. This option means your monthly mortgage payment will be higher, but you won’t have to pay the taxes as a large lump sum.

Some homeowners prefer to pay property taxes directly, separate from their mortgage payment. This option allows you to use an income tax refund or annual work bonus to pay the taxes once a year without increasing your monthly mortgage payment.

How can I reduce the amount I owe?

There may be ways to reduce your property taxes.

  • Make sure you are claiming all eligible exemptions.
  • Find out if refundable tax credits are available or if any local programs limit the amount of taxes owed as a percentage of your income.
  • Review your tax bill for inaccuracies, such as the wrong square footage. If you believe your home’s valuation is incorrect, you can appeal the property’s appraised value to an appraisal review board.

There may be other state or local programs to help reduce your property tax burden if it is a financial strain.

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Talk to an expert for free

Learn about potential tax exemptions and financial assistance options for property taxes. Talk to a HUD-approved housing counselor at no cost.

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