An Expert Reveals the 3 Biggest Things That Could Spike (or Slash!) Your Property Taxes

For homeowners, property taxes are simply the “gift” that keeps on giving. Even if you pay off your mortgage early, the quarterly tax bills just keep coming. And if you make improvements to your house, you can expect a heftier tax bill as a “reward.” But what are property taxes? Why are they sometimes so high — and sometimes not? And if you’re searching for a home, are there things you can look out for to determine if your property taxes will be astronomical? 

Easy enough: Property taxes are taxes levied on your property. 

According to the Tax Foundation, property taxes are levied to fund local governments and create revenue at the state and local levels. Homeowners’ payments typically support schools, roads and infrastructure, police and fire departments, emergency medical services, sanitation, and other services. 

Property taxes are generally based on the size of the property, along with its location and current condition, according to Nicole Beauchamp, associate broker at Sotheby’s International Realty. They are levied by state and local governments, based on your home’s assessed value. 

According to Bankrate, there are two ways your town might calculate property taxes.

1. Your home’s assessed value or market value X local tax rate = property tax
2. Your home’s assessed value or market value X millage rate (x mills/1,000) = property tax

The millage rate is the amount of tax payable per dollar of the assessed value of a property. And if this already didn’t feel like Greek to you, you should also note that the assessed value and the market value are two very different things. The market value is perceived to be the best potential use of the property, present condition notwithstanding (meaning the price it could fetch if you were to put it up for sale in the current market). The assessed value is usually lower because it’s based on a percentage of the market value. 

The average property tax bill for United States homeowners was $1,682 in 2021, per the Tax Foundation. Depending on where you own your home, that figure might make you laugh or cry. If you own a home in New Jersey, which currently has the highest taxes in the country, you might do both.

WalletHub reports that the median value of New Jersey homes was $401,400 in 2022, for which you’d pay $9,345 annually in property taxes. But to give you an example of how far and wide tax rates vary across the country, take California, where the median home value was listed at $659,300, but homeowners pay only $4,694 in property taxes.

Although there are property tax exemptions for those who qualify, homeowners are at the mercy of certain factors that more often than not lead to increased property taxes. 

As previously discussed, the wide range of property taxes and property values across the country is, in a word, staggering. You could move to a region with a lower tax rate, but unless the property values are also lower, you might not see savings.

Whether you enjoy a good DIY project or hire a contractor, the work you’re putting into your house or your yard will likely raise its value. That’s good news for resale, but it also means that there will be a higher property tax bill at reassessment time, which may happen yearly or every few years, depending on where you live. Paying more taxes on a more valuable home might make you reconsider over-the-top enhancements, but it shouldn’t stop you from making necessary fixes to maintain your home’s value.

These go hand in hand with an increase in home values. Assuming the improvements and enhancements in your community — anything from new construction to the enhancement of public spaces — will raise property values, your property taxes will go up along with it, even if you haven’t necessarily done improvements to your home. 

It bears noting that if you move to a community where these wonderful developments are already in place, your property taxes will reflect what is needed to maintain these public places and services (and you’ll live in a beautiful neighborhood!).

While Beauchamp says it all depends on the town, if there are other ways for the local government to collect operating revenue, such as through a business district, property taxes could be lower than those municipalities relying more on taxpayer money.

Beauchamp says property taxes should be an important consideration for home buyers, not just in terms of what they’ll be paying, but also what their payments will fund. Potential homebuyers are buying a lifestyle, not just a home. And there are many homeowners who won’t balk — or they’ll at least balk less — at paying a high tax bill for the lifestyle it affords them.

“I think the key is to actually use the [public] services,” says Nataly Blumberg, a homeowner in Great Neck, New York, who appreciates seeing her high property tax dollars at work. Some of the perks she and her family have enjoyed include the following:

• Excellent schools, starting early with universal pre-K
• Wonderful parks for different ages and abilities
• A marina with discounts for boat owners
• A skating rink and aqua center
• Outdoor concerts
• Indoor and outdoor tennis courts, with reasonably priced lessons
• Continuing education classes and activities for seniors
• Dog parks

Mary Austin owned a home for many years in Huntington Woods, Michigan, a town that happens to be one square mile in size. Despite its diminutive place on the map, it had an elementary school, “which built a great sense of community,” says Austin. 

Taxes were higher than the surrounding towns, but having moved to Michigan from New Jersey, Austin was used to “exorbitant” taxes. And those high taxes afforded Austin and her neighbors “spectacular” city services. 

“The city cleared our residential sidewalks when it snowed,” Austin explains. “You could put an old sofa or appliance out on the curb any time, call City Hall, and it would be taken away in an hour or two. Delightful!”

So while you may be on the fence about buying a home in an area with high property taxes, so long as those fees are within your budget, you should consider what you do and don’t want out of your next home and your future community before walking away.

Are you buying a home or hoping to learn more about the current market? RSVP here for Apartment Therapy's free real estate webinar on Sept. 17, with insights from Egypt Sherrod, HGTV Host & CEO of Indigo Road Realty; Jose Prats, Director of Character Homes at Christie’s International; and Jason Saft, Founder of Staged To Sell Home.