25. The Hidden Costs of Homeownership: Property Tax Surprises

25. The Hidden Costs of Homeownership: Property Tax Surprises gives you a clear, step-by-step way to understand what drives your bill, what to verify on your notice, and what to do if the numbers look off.

Buying a home is often celebrated as fulfilling the “American dream,” but many new homeowners discover that the true cost of homeownership goes far beyond the mortgage payment. Hidden expenses like maintenance, insurance, utilities – and especially property taxes – can sneak up on you. A recent Bankrate study found that the average American household spends $21,400 per year on these “hidden” homeownership costs. Property taxes alone account for a large slice of this (about $4,316 on average) 1. Because these costs are often overlooked in the buying budget, many buyers are shocked when their first tax bill arrives. In fact, a 2025 survey shows roughly two-thirds of homeowners said their

property tax bill was higher than expected. (The median U.S. homeowner’s tax bill was about $3,018 in 2024 4 .) These surprises can derail budgets and cause anxiety for homebuyers who thought they’d “maxed out” their expenses.

• Property taxes vary widely by state and local rules. For example, New Jersey’s effective tax rate is

one of the highest (~2.23%) while Hawaii’s is only ~0.32% 5 . But a low rate doesn’t always mean low bills: states with expensive homes can still produce large tax payments even at low rates. It helps to research your area’s typical tax rate when buying.

• Budgeting often misses taxes. Homebuyers may focus on the down payment, mortgage, insurance

and HOA fees, but forget that taxes will rise over time as home values increase. ATTOM data show the typical tax bill rose 2.7% in 2024 6 , and U.S. property taxes climbed 27.4% from 2019–2024. If your income or budget doesn’t keep up with these hikes, the bill can be a shock.

• Escrow shortages cause sudden bills. Even with a fixed mortgage, taxes can jump unexpectedly.

For example, when local assessments or levies rise mid-year, your mortgage escrow fund may be underfunded. Mortgage servicers call this an escrow shortage – essentially, your monthly escrow payments were too low to cover the higher tax payment. When that happens, borrowers get a shortfall notice or higher next-year escrow, which feels like a surprise “extra” cost. To avoid this, experts advise homeowners to monitor local tax news and annually compare expected escrow to actual bills. Rocket Mortgage notes that paying attention to your county assessor’s notices (and disputing any errors) can prevent escrow shocks. Understanding these hidden expenses is the first step to avoiding sticker shock. Here are key takeaways

and tips:

• Plan for rising taxes: The best approach is to always budget a cushion. Many real estate experts

suggest adding 5–10% extra to your estimated tax costs to protect against increases. Remember that as home values go up, local governments often raise tax rates or budgets follow. Building extra room into your budget means fewer surprises.

• Check your assessment: When you first buy (or each year), obtain the county’s assessment notice.

Compare your home’s assessed value to recent sale prices of similar nearby homes. If your assessment seems too high, you may be overpaying. (Nearly half of homeowners believe their assessment is inaccurate, yet about 78% never appeal 11 .) Consult online tools or ask ProptaxHelper’s community for guidance on checking assessments. 1

• Use relief programs if qualified: In some areas, tax relief or exemptions can lower your bill (e.g.

veteran’s exemptions, senior homesteads, etc.). If you’re entitled to an exemption and didn’t apply, that can explain a sudden high bill. Always check with your local assessor’s office for any credits or abatements you may have missed.

• Stay on top of maintenance costs: Since property taxes fund things like schools and fire districts,

keeping track of your local government budgets can give early warning of tax hikes (see next article on schools). If your town votes on new bonds or spending, a YES vote will eventually mean higher taxes. In short, property taxes are one of the biggest hidden costs of owning a home. By planning ahead, reviewing your assessment, and building a small buffer into your budget, you can avoid being blindsided by your tax bill. ProptaxHelper.com offers calculators and local guides that can help estimate your tax liability; feel free to use our tools or schedule a free consultation to get personalized advice. Remember, it’s better to have a bit more set aside than to be surprised at tax time.

Next steps

• Use the Property Tax Estimator to sanity-check your bill.
• If something looks off, run a quick Appeal Savings scenario.
• Scan the Articles list for related topics like exemptions, deadlines, and escrow planning.