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4 min read Apr 12, 2023

The Ultimate Guide to Property Taxes in the USA

Property taxes are one of the most significant expenses that homeowners pay. These taxes are a major source of revenue for local governments, as they fund schools, infrastructure, and other essential services.

Understanding how property taxes by state work is crucial if you’re a homeowner, or are about to buy a house soon. It can help you plan your finances more effectively.

What is Property Tax?

Property tax is a mandatory tax levied on homeowners by local governments in the United States, based on the value of their properties. The local government calculates real estate taxes by multiplying the assessed value of the property by the local tax rate.

Property taxes are a primary source of revenue for local governments. These taxes fund local services such as schools, police and fire departments, road maintenance, and other essential services.

Property taxes vary significantly from state to state, depending on multiple factors like property values, tax assessment methods, and local government spending.

» Property Tax Rates by State: Check out the average property tax in your state.

How Does Property Tax Work?

A buyer is responsible for paying the property tax from the day they own the property. Typically, the local government prorates the real estate tax rate and assessed value based on the date of the sale.

The local government calculates the real estate tax by multiplying the assessed value of the property with the local tax rate. It’s important for homeowners to keep track of their real estate tax payments.

You can do this by reviewing your property bill and using a tax calculator to estimate your tax payments.

» Tax Deductions for Homeowners: Check out how you can maximize your savings by taking advantage of these 7 tax breaks!

Where do Real Estate Taxes Go?

Generally, the following categories have property tax allocations:

  • Education: Public schools, community colleges, and universities use a significant portion of property tax revenue.
  • Public safety: Property taxes are used to fund police and fire departments, emergency medical services, and other public safety services.
  • Infrastructure: Real estate tax revenue is used to fund infrastructure projects such as road maintenance, bridge repairs, and public transportation.
  • Parks and recreation: These taxes are used to fund community centers, sports fields, and swimming pools.

How Often Do You Pay Property Tax?

Property owners typically pay property tax annually, although the specific timing may vary based on the policies of the local government. In most cases, real estate taxes are due at the end of the year or the beginning of the following year.

Homeowners may have to pay property taxes in advance or arrears, as required by the local government. Some local governments may offer payment plans or allow homeowners to pay their real estate taxes in installments throughout the year.

Lastly, property taxes can be paid via an escrow account as part of a mortgage payment or directly to the local government.

Who do You Pay Real Estate Taxes to?

Property owners typically pay property taxes to the local government where the property is located. This includes the city, county, or township, depending on the specific location.

Likewise, the homeowners get a real estate tax bill from the local government’s tax assessor’s office. The bill includes the amount owed and the due date for payment.

You can review your property tax bill or check your local government’s website for more information about how to pay real estate taxes.

Final Word

In conclusion, real estate taxes are an essential part of homeownership in the USA. Understanding how they work, where they go, and how to calculate them can help homeowners budget effectively and avoid potential penalties or fees.

By staying informed and up-to-date on property tax policies in their local area, homeowners can ensure that they are meeting their financial obligations and protecting their investments for years to come.


1. Are property taxes paid in advance or arrears?

Property taxes are usually paid in arrears, meaning they are paid for the previous year. However, it's important to note that this may vary by location, and property owners should check their local government's policies regarding property tax payments.


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