Being able to afford a home is more than just the monthly payment and home maintenance.

Property taxes are a significant financial portion of the cost. Understanding how they are assessed and how they affect home ownership can help homeowners plan for long-term financial stability.

Property taxes are determined by local governments as a way of paying for essential services such as schools, police and fire departments, road maintenance and other public services. The amount a homeowner pays is based on the assessed value of their property and the local tax rate.

Local assessors evaluate properties periodically to determine their market value. This process varies by jurisdiction, with some areas reassessing properties annually while others do so every few years. Assessors consider factors such as recent sales of similar properties, improvements or renovations and changes in neighborhood property values. Once an assessment is made, the local government applies a tax rate, often referred to as the millage rate, to calculate the homeowner’s tax bill.

Factors that influence property taxes

Several factors can impact property tax rates and assessments:

• Location. Property tax rates vary widely depending on the city, county and state. Some regions have higher tax rates due to greater demand for public services.

• Property value. A home’s assessed value directly affects its property tax bill. Renovations, additions and local market trends can cause fluctuations in assessed value.

• Local government budgeting. Tax rates are set based on municipal and county budgets. If local governments require more revenue to fund services, tax rates may increase.

• Exemptions and deductions. Many jurisdictions offer property tax exemptions for specific groups, such as senior citizens, veterans or homeowners with disabilities. Some areas also provide homestead exemptions, which reduce taxable value for primary residences.

What homeowners need to know

Understanding your property tax obligations can help you avoid surprises and plan accordingly.

Homeowners receive a tax assessment notice detailing their property’s assessed value. Review this carefully and ensure the assessment reflects the property’s actual value. If the valuation seems too high, homeowners can appeal the assessment through their local tax authority.

Property taxes are typically due annually or semi-annually. Homeowners with a mortgage often have property taxes included in their monthly payment through an escrow account, while others must pay the full amount directly to the tax authority. Budget for the payments so that there are no surprises.

Many jurisdictions offer programs that reduce tax burdens for eligible homeowners. Researching available exemptions and deductions can help lower tax bills. Local governments periodically adjust tax rates based on budgetary needs. Attending town meetings or reviewing municipal budgets can provide insight into potential tax increases. By staying informed and proactive, homeowners can better manage their property tax obligations and avoid unexpected financial burdens.