When you buy a home, you’re not just investing in the property itself. You’re also committing to paying property taxes, which can feel like an extra burden. But property taxes serve an important purpose in supporting the communities we live in, from essential services to quality-of-life initiatives. Here's what you need to know about what property taxes are for, how they're assessed, and why they’re a key piece of the homeownership equation.
What Are Property Taxes?
Property taxes are local taxes levied on real estate owners by city, county, or state governments. The amount you pay is typically based on the assessed value of your property. This is not necessarily what you originally paid for it, but rather, its current market value as determined by local tax authorities.
Property taxes are usually billed annually, semi-annually, or included in monthly mortgage payments via an escrow account.
How Are Property Taxes Assessed?
While the exact process varies by location, property tax assessments typically involve:
Determining the Market Value: A local assessor estimates how much your property would sell for under normal market conditions.
Applying the Assessment Ratio: Some areas use only a percentage of the market value (the assessment ratio) to calculate taxable value.
Setting the Tax Rate: Local governments set a "mill rate" or tax rate based on their budget needs for the year.
Calculating Your Tax Bill: Your taxable value is multiplied by the local tax rate to determine your property tax bill.
It’s important to note that property values — and therefore property taxes — can change over time based on market conditions, reassessments, or local government decisions.
What Do Property Taxes Fund?
Property taxes are a vital source of funding for local services that directly impact your quality of life. These services often include:
Public schools (often the largest single portion of your property tax bill)
Police and fire departments
Road maintenance and infrastructure projects
Libraries and community centers
Parks and recreation facilities
Local government operations
Without property tax revenue, cities and counties would struggle to maintain basic services and infrastructure that residents rely on daily.
Help Decide How Your Property Taxes Are Used
While paying property taxes is not a choice, you do have a say in how your tax dollars get spent. Local governments typically make decisions about property tax rates and spending priorities through budget meetings, public hearings, and elections. Here are a few ways you can get involved:
Attend city council meetings where budgets and funding allocations are discussed.
Vote in local elections, especially for school boards, city councils, and county commissions that oversee major spending decisions.
Participate in public hearings related to proposed tax rate changes or bond measures.
Stay informed about ballot initiatives that impact funding for schools, parks, emergency services, and other community needs.
Engaging locally gives you a voice in how your property taxes are used and helps ensure that your community reflects the priorities and values that matter most to you.
“Avoiding” Property Taxes: Financial Goals vs. Quality of Life
It’s natural to want to minimize your property taxes to save money. And choosing a lower-tax area can be a smart move for many, if not most, budgets. However, it’s important to weigh tax savings against the value of the services that those taxes could support.
Higher property taxes often correlate with:
Better-funded public schools
Well-maintained roads and public facilities
Stronger emergency services
More robust community amenities
When evaluating where to buy a home, consider how property taxes fit into your larger financial goals. But don’t ignore how the quality of local services might impact your day-to-day life – as well as your long-term property value.
Why Understanding Property Taxes Matters for Homebuyers
Property taxes aren’t just another bill. They’re an investment in your community. By understanding what property taxes are for, how they’re assessed, what they fund – and how you can help determine those decisions – you can be more informed when buying or owning a home. A little foresight now can help you find the right balance between financial responsibility and quality of life.
About the Author
Unison
We're the pioneers of equity sharing, offering innovative ways for you to gain access to the equity in your home. For more than a decade, we have helped over 12,000 homeowners to pursue their financial goals, from home renovations to debt consolidation, retirement savings, and more.
