New York City Mayor Zohran Mamdani has proposed a property tax hike. (Theodore Parisienne/New York Daily News/Tribune News Service via Getty Images)
TNS
In New York City, property taxes are back in the headlines. Mayor Zohran Mamdani has floated the idea of raising them—by roughly 10%—as part of this year’s budget. Mamdani says it’s a last resort, claiming that if Albany won’t raise taxes on millionaires, the city may have to raise them on property instead.
The proposed hike has raised eyebrows across the country, not just in New York City. Property taxes have long been a political land mine because of their impact on household finances—including on your federal income tax return.
What Are Property Taxes?
Property taxes (more properly called real estate taxes) are local taxes imposed on real estate based on its assessed value and are primarily used to fund schools and other local government services, including sanitation, police and fire departments, parks, and street repairs.
According to the Tax Foundation, in fiscal year 2022, property taxes accounted for 27.4% of total state and local tax collections in the United States—more than any other category of tax revenue. Local governments rely even more heavily on them: property taxes accounted for 70.2% of local tax collections in fiscal year 2022.
Property tax rates can vary, even within states. One way to compare is to look at effective tax rates on owner-occupied housing—the average amount of residential property taxes actually paid, expressed as a percentage of home value.
Kelly Phillips Erb
State and local governments favor property taxes because they provide a relatively steady income stream. The tax base doesn’t move, and it rarely shrinks significantly. Houses and commercial properties don’t relocate across state lines, and over time, property values tend to rise rather than fall.
So, if the tax base is relatively stable, why are property taxes so different in Haddonfield, New Jersey, compared with Sumter, South Carolina? It comes down to two factors: property values and the tax rate.
How Property Value Is Determined
Every city or county has an assessor’s office. Its job is to determine what your property is worth—typically what it would sell for in an ordinary market transaction.
For houses and condos, that usually means reviewing comparable sales. What have similar properties sold for recently?
For commercial buildings, assessors often rely on income data, including rents, expenses, and operating income.
Once a value is determined, the tax rate is applied. In some places, the rate is expressed in mills—dollars per $1,000 of assessed value. In others, it’s stated as a percentage. Either way, the math is the same: assessed value multiplied by the tax rate equals the tax bill.
When Reassessment Happens
How often a property is reassessed can significantly affect your property tax bill.
Some jurisdictions reassess every year. Under Florida law, once a property receives a homestead exemption, it is reassessed on January 1 of each year to determine its current market value, subject to statutory limits on how much the assessed value can increase.
Other jurisdictions reassess every few years. In Cook County, Illinois, for example, properties are reassessed once every three years under a rotating schedule.
Still others reassess at sale. Under California’s Proposition 13, a reassessment generally happens only when ownership changes (or when new construction occurs). Between ownership changes, annual increases are capped.
In a rising market, that timing becomes especially important. From 2020 through 2025, U.S. house prices climbed roughly 55% nationwide, with many markets seeing even larger gains. That appreciation increased homeowners’ equity, but it also raised assessed values and, in many cases, tax bills.
To limit sharp spikes, some states impose caps on annual increases. For example, in California, your assessed value generally cannot increase by more than 2% per year unless the ownership changes. Florida caps annual growth in taxable value for homesteaded property at the lesser of 3% or inflation. Texas also limits how quickly a home’s taxable value can increase.
These rules promote predictability, particularly for long-term owners. But they also mean that new buyers often pay taxes based on full market value. That’s one reason tax bills can differ widely—even between similarly situated homes on the same street.
What If the Assessment Is Wrong?
If you believe your property has been overvalued, you usually begin by contacting the assessor’s office to correct factual errors—incorrect square footage, an extra bathroom, or a misclassification. If that doesn’t resolve the issue, you can file a formal appeal with a local board of assessment review. In many jurisdictions, you can also take the case to court.
The time and expense of challenging depend on where you are in the process. You can generally request an informal review on your own and expect it to take a few weeks. An administrative hearing before the board of review can take a few months from filing to decision, while a court appeal can take six months to a year or more, depending on complexity.
Importantly, deadlines may be strict. In many jurisdictions, you have 30–60 days from the date of an assessment notice to file an appeal. Miss the deadline, and you generally have to wait until next year.
Reassessment Considerations
Appealing isn’t always as simple as filing paperwork. In Texas, for example, once the tax bill is issued, you generally must pay the undisputed portion—and often a large share of the disputed amount—before going to court.
In New Jersey, appeals are reviewed from scratch. That sounds like a good thing until you realize the door swings both ways. If the evidence shows the property was overvalued, you walk away with a lower tax bill. But if it shows the property was undervalued, the assessment can increase.
The goal of a reassessment is to show that the property is worth less than the assessed value. For residential property, the best evidence is generally comparable sales (comps), which you can get from public records, MLS data, or a local real estate agent. (Boards often expect more formal valuation support in commercial cases.)
An appraisal can make sense if the potential tax savings are significant or the property is unique. For example, if a farm in a rapidly expanding area is used as farmland, the “highest and best” use value may not reflect its actual value (some states, such as Iowa and Pennsylvania, have special “ag” tax rules for farmland). Be aware that a residential appraisal can cost several hundred to over a thousand dollars, and commercial appraisals can cost much more.
A real estate attorney could also be helpful if you’re going to court or if the valuation difference is significant. Legal fees can reach thousands or tens of thousands of dollars, depending on the issues. Some attorneys may work on contingency (meaning they’re paid only if you win), which can make the potential savings justify the cost.
Additional Relief Programs
Since property values can disproportionately impact certain taxpayers, some states offer targeted savings.
For example, Pennsylvania offers a statewide income-based rebate for qualifying seniors, widows and widowers, and individuals with disabilities. The rebate isn’t a tax reduction applied to the bill itself but is paid after the fact.
Wisconsin administers a homestead credit that refunds a portion of property taxes (or rent) to lower-income residents. Unlike Pennsylvania’s program, Wisconsin’s relief is part of the income tax system. It operates as a refundable credit rather than a separate direct rebate program.
Programs like these don’t eliminate property taxes, but instead offer some relief for pockets of taxpayers.
The Federal Piece: The SALT Deduction
The impact of property taxes also shows up on your federal income tax return.
If you itemize deductions, you can deduct certain state and local taxes paid during the year, including property taxes. This is known as the state and local tax (SALT) deduction and applies to state and local income taxes (or, alternatively, general sales taxes), plus real estate and personal property taxes that are based on assessed value. The deduction applies only to taxes actually paid during the year and only if you are legally liable for them (you must own the property to deduct real estate taxes).
Before 2017, there was no limit on your SALT deduction—if you paid $80,000 in real estate taxes, you could deduct $80,000. The Tax Cuts and Jobs Act changed that, capping the SALT deduction (for both income and real estate taxes) at just $10,000 per year, or $5,000 for married couples filing separately.
That cap became a major issue in 2025 during negotiations among Republicans over their One Big Beautiful Bill Act. Lawmakers from high-tax states pushed to raise the limit. A compromise vote has temporarily increased the cap to $40,000 for most filers in 2025 (half that for married filing separately), with adjustments for inflation through 2029. The cap will drop back to $10,000 in 2030 unless Congress acts.
The expanded cap also phases out at higher income levels. Once your modified adjusted gross income exceeds certain thresholds, the benefit begins to shrink (but it won’t fall below the original $10,000 cap).
Why does this matter? Once you reach the SALT cap, additional property taxes are no longer deductible. In higher-tax states, that makes local increases a bit more painful. And that assumes you itemize at all—roughly 90–92% of taxpayers now take the standard deduction.
Why the NYC Debate Matters
Taxpayers care about the New York City proposal for the same reasons that many were focused on the SALT caps—unlike more “invisible” taxes, like sales tax, property taxes are visible. It’s especially true in areas with rising property values which can make housing feel unaffordable.
Immediately after the pandemic, some states opted for property tax relief using budget surpluses. As revenue growth has slowed, holding onto or deepening those cuts becomes more difficult.
Wyoming lawmakers, for example, are considering expanding property tax relief while exploring alternatives such as higher sales taxes to replace the revenue. But projections show that replacing property taxes entirely would leave a significant revenue gap.
In Florida, where there is no individual income tax, Republican Governor Ron DeSantis has pushed to end property taxes, resulting in a slate of property tax reform proposals. Many of the bills have drawn pushback from local leaders, since, without a replacement revenue stream, they may result in cuts to fire and emergency departments.
And in Texas, which also doesn’t have an individual income tax and relies heavily on property taxes, a $10 billion property tax relief package relies mostly on one-time surplus funds to make up the revenue school districts would lose. Once that surplus is gone, it’s not clear how—or if—the state will replace lost property taxes.
Efforts to reduce or cap property taxes carry a downside: without a long-term replacement plan or significant spending cuts, they can cause budget woes at the local level. In some cases, this can lead to service reductions. In others, it leads to future rate increases.
New York City’s proposed 10% increase is an example of how that might play out. Property taxes remain one of the most stable revenue sources for local governments. Cutting them is politically appealing, while raising them is politically difficult. Figuring out how to balance those things? That’s the trickiest part of all.
Source: https://www.forbes.com/sites/kellyphillipserb/2026/02/25/new-york-citys-proposed-95-real-estate-tax-hike-hits-a-national-nerve/
