Definition
An annual local tax on real estate, calculated as the area's rate applied to the property's assessed value. It funds schools and local services, and for most homeowners it rides along with the mortgage payment through escrow.
Why it matters
Property tax is the housing cost that never gets paid off and rarely goes down, and reassessments raise the payment even on a fixed-rate mortgage. Rates vary widely by state and county, which changes what the same house truly costs.
Example
A home assessed at $400,000 with a 1.2% effective rate owes $4,800 a year, about $400 a month inside the mortgage payment. After a reassessment to $450,000, the bill grows to $5,400 and the monthly payment quietly rises by $50.
Put it into practice
Related terms
This definition is educational, not financial, legal, or tax advice. U.S. rules and limits change; verify time-sensitive details with official sources. See our disclaimer.