Local governments levy an annual tax based on the assessed value of real estate. That tax is the property tax. It funds schools, public safety, infrastructure, and other municipal services.

Rates and assessment practices differ widely by jurisdiction. Owners receive tax bills, often payable in installments. Failure to pay can result in interest, penalties, and eventual tax foreclosure. Many lenders collect property taxes through monthly escrow to ensure they are paid on time.

Property taxes are a significant ongoing cost of ownership and are factored into investment analyses. Appeals processes exist for owners who believe their assessments are too high. Tax exemptions or limitations may apply for primary residences, seniors, or other categories depending on local law.

The tax bill arrives every year whether the property has produced income or not.