Property taxes in 2026 — how they're calculated, why they vary so much, and what it means for your monthly payment
Property tax rates range from 0.29% in Hawaii to 2.23% in New Jersey. Here is how assessed value and mill rates work, which states have the highest and lowest effective rates, and how to factor taxes into your real payment.
Property tax is the line item most buyers underestimate. At 1.1% nationally — the rough US average — it adds $367/month to the cost of a $400,000 home on top of principal, interest, and insurance. In New Jersey it adds $743/month. In Hawaii, $97. The difference matters for affordability, qualifying, and the real total cost of ownership in each market.
How property taxes are calculated
Every US property tax bill is the product of two numbers: the assessed value and the mill rate (tax rate). The formula is simple:
The complexity comes from how assessed value is determined. Most states require assessors to value property at or near market value, but the rules for when values are updated, and by how much, vary enormously:
Annual reassessment states
States like Ohio, Michigan, and many others reassess every 1–3 years. After a home sale, the new purchase price is often used as the assessment basis. Tax bills can jump significantly after a purchase in a rising market.
California — Prop 13 model
Assessments reset to purchase price at sale, then increase at most 2%/year. A homeowner who bought in 2002 pays tax on a fraction of current market value. Buyers pay taxes on what they paid — which is full market value.
Texas — no state cap
Assessed values can increase without statutory limit, though local homestead exemptions provide partial protection. The legislature has introduced periodic appraisal caps — check the Texas Comptroller for current rules.
Effective property tax rates by state (2026)
Effective rate = median annual bill ÷ median home value. This normalizes for different home prices and reflects what buyers in each state actually pay relative to what they buy:
| State | Effective rate | Median annual bill | Note |
|---|---|---|---|
| New Jersey | 2.23% | $9,440 | Highest in US |
| Illinois | 2.08% | $5,620 | High rates, midwest prices |
| Connecticut | 1.92% | $6,153 | |
| Texas | 1.74% | $4,375 | No state income tax |
| New York | 1.54% | $5,590 | |
| Pennsylvania | 1.49% | $3,018 | |
| Florida | 0.91% | $2,143 | |
| Colorado | 0.55% | $2,017 | TABOR limits |
| California | 0.74% | $3,994 | Prop 13 cap |
| Hawaii | 0.29% | $1,893 | Lowest rate in US |
Source: Tax Foundation state property tax data. Effective rates based on median owner-occupied home value.
What this means for your monthly payment
Lenders include property taxes in PITI — principal, interest, taxes, insurance — and use the full PITI to calculate your debt-to-income ratio. A high-tax state doesn't just cost more; it reduces how much mortgage you qualify for. On a $120,000 income at the 28% front-end limit, you have $2,800/month for total housing cost. Here is how much of that gets consumed by property tax alone across four states on a $450,000 home:
New Jersey
2.23% rate
$838/mo tax
$1,962 left for P&I+ins
Qualifies ~$265K loan
Texas
1.74% rate
$653/mo tax
$2,147 left for P&I+ins
Qualifies ~$293K loan
Florida
0.91% rate
$341/mo tax
$2,459 left for P&I+ins
Qualifies ~$339K loan
Hawaii
0.29% rate
$109/mo tax
$2,691 left for P&I+ins
Qualifies ~$374K loan
$450,000 home, $120,000 income, 28% front-end limit, 7% rate. Insurance estimated at $150/mo. Loan qualifying amount at same rate and income.
The same income qualifies for a $109,000 larger loan in Hawaii than in New Jersey — purely because of property tax rate differences on the same home price. This is why cross-state affordability comparisons that only look at home prices miss the real picture.
Homestead exemptions: reducing your bill
Most states offer a homestead exemption that reduces the assessed value of a primary residence for tax purposes. Texas offers a $100,000 homestead exemption for school district taxes. Florida's homestead exemption is up to $50,000 and also provides the Save Our Homes cap (3% annual increase limit on assessed value). Always apply for the exemption in the year you purchase — it is not automatic in most jurisdictions, and missing the filing deadline means waiting a full year.
Model your full PITI payment
The calculator includes a property tax field. Enter your home's address estimated tax rate to see your full monthly PITI — not just P&I — and how it affects your front-end debt-to-income ratio.
Common questions
Can my property tax increase after I buy?
Yes, in most states. Assessed values are updated on a schedule (annually, biennially, or after a sale trigger) and tax rates can be adjusted by local governments each budget cycle. California is a notable exception — Proposition 13 limits annual assessment increases to 2% until the property is sold. Most states have no such cap. A significant tax increase can materially change your PITI payment even with a fixed-rate mortgage. Budget for this possibility when evaluating affordability.
Why are Texas property taxes so high?
Texas has no state income tax. Local governments — cities, school districts, counties — fund operations almost entirely through property taxes, producing effective rates of 1.6%–2.5% in most metros, among the highest in the US. The Texas Comptroller oversees the property tax system and publishes annual rate data by district. High property taxes are the mathematical tradeoff for zero state income tax.
What is the difference between assessed value and market value?
Market value is what a buyer would pay for the property today. Assessed value is what the local assessor determines for tax purposes — it may be equal to, a fraction of, or occasionally more than market value depending on local law. California assesses at market value at last sale then limits growth. Some states assess at 50–80% of market value by statute. The assessment multiplied by the mill rate produces your tax bill.
How do I appeal a property tax assessment?
Every jurisdiction provides an appeal process. The typical path: file a formal appeal with the local Board of Review or Equalization before the annual deadline (usually 30–90 days after the assessment notice). Prepare comparable sales data showing the assessed value exceeds market value. Roughly 20–40% of residential appeals result in a reduction according to International Association of Assessing Officers data. The cost is filing time and possibly a $50–$100 fee.
Are property taxes included in my mortgage payment?
Usually yes, through an escrow account. Your lender collects 1/12 of the estimated annual tax bill each month, holds it in escrow, and pays the bill when it is due. If taxes increase, your lender adjusts the escrow portion of your payment at the annual escrow review. You can opt out of escrow in some cases (typically if your LTV is below 80%), but then you are responsible for paying the tax bill directly.