Rising property tax bills are stinging US homeowners — but these 8 states are doing something about it

Home values influence property taxes

First, it helps to know how property taxes are calculated. Your property taxes are calculated by multiplying the “mill rate” by your property’s assessed value. The mill rate, or mill levy, is the sum of the rates charged by the county, city and school district. This rate is determined by the funding needs of these jurisdictions and the total assessed property value of the county.

So, for example, if the three entities need a combined $3 million in funding and the total assessed property value in the county is $100 million, then the mill rate would be 3%.

The assessed value of your property is based on market values for your area. These assessments are performed either annually or every few years, and the assessed value is determined using one or more methods: sales evaluation, cost and/or income.

The sales evaluation method uses regional comparable sales to determine the assessed value of your property. The cost method bases the assessment on how much it would cost to replace the property, and the income method is based on an estimate of how much rental income the property can generate.

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Taxes are rising, but incomes aren’t

Home prices, as measured by the U.S. National Home Price Index, have gone up 54.3% over the past five years (to April 2024), which has contributed to a rise in property taxes for many homeowners.

According to U.S. Census Bureau data, state and local property tax revenue rose by 24% from Q1 2019 to Q1 2024, while according to Tax Foundation calculations state and local property tax collections per capita rose 21.7% from 2016 to 2021.

But, after inflation, incomes aren’t keeping pace. Real median household income rose just 3.75% from April 2019 to April 2024. That’s why property tax increases can be particularly painful for low-income households and retirees on a fixed income.

Some states are coming to the rescue

While local governments set property tax rates, state governments set limitations on those rates. But this can have unintended consequences. While homeowners can directly benefit from cuts in property taxes, they might also notice service cutbacks in their community.

To remedy this, some states are offering compensation to local governments when property taxes are cut back. This year, Alabama, Kansas and Wyoming have enacted laws to limit property tax hikes, according to realtor.com, while Arizona, New Mexico, Colorado, Missouri and Georgia have certified ballot measures on which voters will decide this year.

New rules in Alabama limit the year-over-year increase in assessed values on residential and commercial property to 7%, while Kansas’s legislation increases the residential property tax exemption to $75,000. Wyoming’s legislation limits annual increases on residential structures and land to 4% and doubles the veterans tax exemption to $6,000 of assessed value.

In Arizona, a ballot measure would allow property owners to request refunds in certain circumstances, such as where public nuisance laws are not enforced. New Mexico is proposing increased tax exemptions for veterans and an adjustment to the exemption for disabled veterans.

Voters in Colorado will decide whether to cap property tax increases at 4%, and in Missouri they’ll vote on whether child-care facilities should be exempt from property taxes. Georgians, meanwhile, will vote on whether a home’s assessed tax valuation should be capped at the rate of inflation unless a local jurisdiction opts out.

It remains to be seen if many of these measures will become law, but homeowners can take heart that these states are trying to help.