Tax season is in full swing, and for many homeowners, it is a time to take a closer look at finances and the different taxes paid each year.
If you’ve ever wondered why your property taxes increased or decreased, the answer usually comes down to changes in your home’s assessed value or adjustments to local tax rates. Understanding how property taxes work can help you make sense of these changes and better plan for this ongoing housing expense.
What are Property Taxes?
Property taxes are a local government tax on real estate. Unlike income taxes, they are not collected by the state. Instead, they are collected by counties and municipalities.
Property taxes apply to many types of real estate, including:
- Single-family homes
- Condos and townhomes
- Rental properties
- Vacant land
The revenue collected from property taxes helps fund important community services such as:
- Public Schools
- Police and fire departments
- Road maintenance
- Parks and libraries
How are Property Taxes Calculated?
Property taxes are calculated by multiplying your property’s assessed value by the local tax rate.
In North Carolina, tax rates are expressed in cents per $100 of assessed value.
Example: A home valued at $200,000 with a combined tax rate of $0.75 per $100 would pay:
(200,000 ÷ 100) X 0.75 = $1,500
Your final tax amount may include multiple rates, such as:
- County taxes
- City or town taxes (if you live within municipal limits)
- Special district taxes (for things like fire districts)
Why Did My Property Taxes Change?
If your property tax amount changes, it’s usually because one of the two parts of the above calculation changed.
- Your Property's Assessed Value Changed: In North Carolina, counties conduct property revaluations every four to eight years, depending on the county, to reassess property values and current marketing conditions. During this process, local officials estimate a property’s market value based on factors such as:
- The size and location of the property
- Recent sales of similar homes
- Market conditions
- Home improvements or renovations
- The age and condition of the property
If the assessed value of your home increases or decreases during a revaluation, your property taxes may change as well.
- The Local Tax Rate Changed: Counties and municipalities set property tax rates each year to help fund local services. If your local government raises or lowers its tax rate, your property taxes may change even if your home’s value stays the same.
How Are Property Taxes Paid?
Some homeowners pay property taxes through their mortgage escrow account. A portion of their monthly mortgage payment is set aside for property taxes, and the lender pays the taxes on their behalf when they are due. Others pay property taxes directly to their county.
In North Carolina, property tax notices are typically mailed in August. Taxes are officially due September 1, but they can be paid without penalty until January 5.
Property taxes are an important part of how local communities fund schools, emergency services, infrastructure and other public resources. While changes to your property taxes can sometimes be surprising, they usually reflect updates to your home’s assessed value or adjustments to the local tax rates. Understanding how property taxes work can help you better plan for the cost of home ownership and make sense of changes when they occur.