Taxes for homebuyers

Property tax basics for first-time buyers

Property tax is set locally, billed on local schedules and usually paid through your escrow account. The seller's bill is a starting point, not a forecast. A sale can trigger a new assessment, the seller's exemptions may not carry over, and you may need to apply for your own. Here is how it fits together, with federal figures for the 2026 tax year.

Reviewed November 2026 · Written for Buy Home Tips from the sources listed below

Tax year: Tax figures on this page apply to the 2026 tax year. They were checked against IRS material in November 2026, and each figure is labelled with its year. Tax rules change; use the IRS instructions for the year you file.

Property tax is the one housing cost that no lender, insurer or seller controls. Local governments set it, and each state has its own system. The general pattern is the same in most places, and knowing it helps you budget accurately and avoid an unpleasant first bill. Federal tax figures here are for the 2026 tax year.

How a bill is built

Most systems have three parts:

Assessed value. A local assessor or appraisal district estimates the home's value for tax purposes. Some states assess at full market value, some at a fraction, and some limit how fast assessed values can rise.
Exemptions. Reductions in taxable value for things like a primary residence, age, disability or veteran status.
Rates. Each taxing unit, such as the county, city, school district and special districts, sets a rate. The bill applies the combined rate to the taxable value.

Rates and assessments change every year, so the bill changes too.

Why your bill may differ from the seller's

Reassessment. In some states, a sale resets the assessed value to the price or triggers a new review. A seller who has owned for many years may have a much lower assessed value than you will.

Exemptions do not transfer. The seller's homestead, senior or veteran exemption usually ends with the sale. You may qualify for your own, but you often have to apply.

Timing. Some places bill a year in arrears, others in advance, and some send supplemental bills after a sale.

Ask the county assessor or appraisal district how a sale affects the next bill, and budget using that answer, not the seller's bill.

Homestead exemptions: one state's example

Many states reduce taxes on a home you live in. Texas is a clear example. Its Comptroller explains that a residence homestead exemption removes part of a home's value from taxation, and that state law requires school districts to provide a $140,000 exemption on a residence homestead. Other taxing units can add local-option exemptions. Applications go to the appraisal district in the county where the property is, and the general deadline is before May 1.

At closing: proration

Property taxes are usually divided between buyer and seller by the day of ownership. If the seller has prepaid taxes that cover days after closing, you reimburse them. If taxes for the seller's time are not yet due, the seller credits you. These adjustments appear on the Closing Disclosure, and the CFPB's explainer shows where.

Escrow

The CFPB notes that many lenders require taxes and insurance to be paid through an escrow account. Your servicer collects part of each payment and pays the tax bill when it is due. Because taxes change, the escrow part of your payment changes too. The servicer reviews the account each year and adjusts the payment.

The 2026 federal deduction

If you itemize, property tax is deductible as part of state and local taxes. IRS Topic 503 lists state and local real property taxes among the deductible taxes. For the 2026 tax year, the IRS says the combined limit on state and local income, sales and property taxes is $40,400, or $20,200 if married filing separately. It is reduced for modified adjusted gross income above $505,000, or $252,500 if married filing separately, but not below $10,000, or $5,000. You deduct taxes in the year you pay them, including amounts paid from escrow.

The bottom line

Price property tax from the county's view of your future bill, not the seller's history. Apply for any exemption you qualify for, check the proration at closing and watch your escrow statement. If you itemize, include property tax under the 2026 state and local tax cap.

Getting the property tax right

Look up the current bill and assessed value on the county website.
Ask the county or appraisal district how a sale affects the next assessment.
Note which exemptions the seller has and which you can apply for.
Check the proration on the Closing Disclosure.
Apply for your homestead or similar exemption by the local deadline.
Read your first escrow statement and the next tax bill when they arrive.

Questions buyers ask

How is property tax calculated?

Local governments assess the home's value, subtract any exemptions and apply the combined tax rates of the taxing units, such as the county, city and school district. Details vary by state.

Will my tax bill match the seller's?

Not necessarily. A sale may lead to a new assessment, and exemptions the seller had may end when they sell. Ask the local assessor how a sale affects the next bill.

What is a homestead exemption?

A reduction in taxable value for a home you live in, offered in many states. In Texas, for example, the Comptroller notes that school districts must provide a $140,000 residence homestead exemption.

Can I deduct property tax in 2026?

If you itemize. For the 2026 tax year, the IRS says state and local taxes, including property tax, are deductible up to a combined $40,400, or $20,200 if married filing separately, with a reduction at higher incomes.

Sources checked for this page

Checked November 2026. Programs and limits change; confirm with the source before you rely on a figure.