Property Tax

Every year, your local government sends you a bill based on what they think your property is worth. The formula is simple: assessed value times the local tax rate (sometimes called the mill rate). A home assessed at $300,000 with a 1.5% rate means a $4,500 annual bill.

Where you live makes a dramatic difference. New Jersey has the highest effective rate in the country at roughly 2.2%, while Hawaii sits at just 0.3%. Even within the same state, rates bounce around by county and city. A $400,000 home could cost you $2,000 a year in one town and $10,000 in another—a gap that seriously affects how much house you can actually afford.

If you have a mortgage, you're probably already paying property taxes without thinking about it. Your lender collects 1/12 of the annual tax with each monthly payment and stashes it in your escrow account. Once the mortgage is paid off, you're on the hook to pay the tax directly—usually in two semi-annual installments.

Here's a tip many homeowners miss: you can appeal your assessment. If your assessed value is higher than what your home would realistically sell for, file an appeal with comparable sales data. Success rates vary, but plenty of homeowners save hundreds or even thousands a year this way.

On the tax-deduction side, property taxes fall under the state and local tax (SALT) deduction. The 2017 tax reform capped SALT at $10,000, but starting in 2025, the One Big Beautiful Bill Act raised that cap to $40,000 ($40,400 for 2026). The higher cap phases out for MAGI above $500,000, dropping back to $10,000 for high earners. If you're in a high-tax state like New York, New Jersey, or California, this matters a lot.