Property taxes are a crucial source of revenue for local governments, funding essential services like public education, police and fire departments, and infrastructure maintenance. These taxes are typically calculated based on the assessed value of a property, which is determined by local tax assessors. The assessed value is often a percentage of the property's market value, though the exact method varies by jurisdiction. Once the assessed value is established, a tax rate—often referred to as a millage rate—is applied. The millage rate is usually expressed in mills, where one mill equals one-tenth of a percent (0.1%) of the assessed value. For example, if a property is assessed at $200,000 and the local millage rate is 20 mills, the annual property tax would be $4,000.

The impact of property taxes on home ownership is significant. High property taxes can make homeownership more expensive, potentially putting it out of reach for some buyers, particularly in areas with rapidly increasing property values. For current homeowners, rising property taxes can strain budgets, especially for those on fixed incomes, like retirees. Additionally, high property taxes can affect a home’s resale value, as potential buyers factor in the ongoing cost of taxes when considering a purchase. Conversely, areas with low property taxes might attract more buyers, driving up property values. However, this can also result in fewer services or lower quality services funded by tax revenues, which might deter some potential residents. Ultimately, property taxes are a key consideration in the broader financial landscape of home ownership, influencing decisions on where to buy and how much house one can afford.