If you are a new homeowner or considering becoming one, understanding how much you might pay in taxes is a crucial component of your monthly and annual budget. You don’t want to get caught with a large tax liability. Check out our property tax calculator below to get an idea of how much you need to save annually to pay your property tax bill.
What Is Property Tax?
Property tax is an annual or semiannual tax levied by your city, county, or state government. It is levied based on a percentage of the assessed value of the real property, which includes real estate, including the home and property.[1]
Local property taxes are the primary source of tax revenues for cities and counties. They fund regular city services like firefighters, police, and garbage services. Your funds can also support local libraries, schools, and teachers.
Read More: What to Know About Home Appraisals
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Property Tax Calculator
What Do Property Taxes Pay For?
The distribution of property taxes depends on state and county rules and regulations. Some states dictate how funds are distributed, while others delegate this responsibility to the counties. Here is what your property tax could fund:
- Schools and education
- Law enforcement
- Fire protection
- Public libraries
- Garbage collection
- Road and infrastructure
- Sewer and water services
Read More: What Is Your Disposable Income?
How to Pay Property Taxes
You can pay your property taxes through a variety of outlets, including:
- Online payments can be made through your state or county’s Department of Revenue website using your checking account or credit card information.
- In-person checks, money orders, or credit cards can be processed at local state revenue offices.
- Phone payments can be processed by the Department of Revenue if you are using a credit card.
- Monthly Mortgage Payments usually include principal, interest, and property tax payments. The property tax payment is calculated based on the lender's best estimate of your total property tax due. Your payments are held in an escrow account until payment is due at the end of the year.
Read Also: 7 Steps to File Your Taxes
Where to Save For Taxes
Depending on where you live, property taxes can be a large part of your housing costs. Most mortgage lenders want you to have your monthly mortgage contain part of your estimated annual taxes.
You can opt out of this and save for your semiannual or annual tax payment. Here are some places you can stash your savings and earn interest income:
- Checking Accounts give you the ability to access your funds easily. While most checking accounts don't offer the highest APYs, the flexibility to quickly access your funds is essential. (Read our picks for the Best Checking Accounts).
- High-Yield Savings Accounts can boost your savings with APYs above a traditional checking account. These accounts offer flexibility in accessing your funds and provide the opportunity to earn above-average interest. (Read our picks for the Best High-Yield Savings Accounts).
- Certificates of Deposit are perfect investments for storing your cash. You use short-term CDs when saving for taxes. You can invest in 3-, 6-, or 9-month CDs, providing the short-term duration you need and the ability to earn interest. (Read our picks for the Best Certificates of Deposits).
Smart Summary
Property taxes are due every year. They are calculated based on a percentage of your real estate's assessed value, which typically includes your home, property, or any permanent structures (e.g., a room over the garage). To reduce the risk of property tax payment issues, lenders want you to pay an estimated monthly amount as part of your mortgage payment.
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(1) Taxfoundation.edu. Property Tax. Last Accessed April 18, 2025.
