Property tax is an annual tax levied by local governments — counties, cities, municipalities, school districts, and special taxing districts — based on the assessed value of real property. It is one of the primary sources of funding for local public services including schools, roads, fire and police departments, parks, libraries, and government operations. Property tax rates (expressed as millage rates — dollars per $1,000 of assessed value) vary significantly by location, and annual tax bills can range from a few hundred dollars in low-tax rural areas to tens of thousands in high-tax metropolitan areas.
The property tax calculation involves two components: the assessed value and the tax rate. The assessed value is determined by the county property appraiser and may differ from the fair market value. In Florida, the assessed value includes the benefit of the homestead exemption (up to $50,000 reduction) and the Save Our Homes cap (limiting annual assessment increases to 3% for homesteaded properties). In Texas, the assessed value is typically closer to market value, with exemptions available for homesteads, seniors, veterans, and disabled persons.
Unpaid property taxes create a tax lien on the property that takes priority over virtually all other liens — including mortgages. This super-priority status means the government can force the sale of the property to collect unpaid taxes, potentially wiping out the mortgage holder's lien. This is precisely why lenders require escrow accounts to collect and pay property taxes — ensuring they are always current and the lender's collateral is protected.
At closing, property taxes are prorated between buyer and seller based on the closing date. The seller is responsible for taxes from January 1 (or the start of the fiscal year) through the closing date; the buyer is responsible from the closing date forward. If the seller has already paid taxes for the full year, the buyer credits the seller for the unused portion. If taxes are unpaid, the seller's share is deducted from their proceeds.
Use Beycome's free property tax calculator to estimate taxes for any property, and our closing cost calculator to see how tax prorations affect your closing costs. At Beycome Title, we verify tax status directly with the tax collector's office for every transaction, ensuring all taxes are current and properly prorated. Get your free closing quote.