Property tax is one of the biggest costs of owning a rental or holding a flip, and it is easy to underestimate. The good news: the formula is simple once you know the local terms.
01The formula
Tax = (market value × assessment ratio − exemptions) × tax rate.
- Market value: what the county thinks the property is worth.
- Assessment ratio: the share of value that is taxed. It is 100% in many states, 35% in Ohio and 10% in Arizona, for example.
- Exemptions: homestead, senior, veteran or disability amounts taken off the assessed value.
- Tax rate: often written in mills. One mill is $1 per $1,000, so 25 mills = 2.5%.
02A worked example
A house worth $300,000 in a state with a 35% assessment ratio has an assessed value of $105,000. With a $25,000 homestead exemption the taxable value is $80,000. At 70 mills (7%) the tax is $5,600 a year, about $467 a month, or 1.87% of the market value.
03Why the bill can jump after a sale
Several states reassess a property when it sells, and the seller's homestead or senior exemption usually ends with the sale. Budget with the tax a new owner will pay, not the seller's bill.
04Property tax as a seller signal
Owners who stop paying property tax are often under pressure. Tax-delinquent and certified-delinquent owners are among the most-used motivated-seller lists, and the county publishes them. LeadCounty refreshes them every week from the treasurer's records, with the amount owed and the years behind.
