Are Real Estate Taxes and Property Taxes the Same in USA? A Complete Guide to Property Insurance and Tax Understanding
If you’ve recently bought a home or are planning to, you’ve probably come across terms like “real estate taxes” and “property taxes” on your mortgage statements, tax forms, and insurance documents. Are they the same thing? The short answer is yes—but there’s more to the story than meets the eye.
Let me walk you through everything you need to know about property insurance, real estate taxes, and how they affect your homeownership journey in the United States.
Understanding Property Taxes and Real Estate Taxes: What’s the Difference?
Here’s the thing: property taxes and real estate taxes are essentially the same thing in most contexts across the United States. Both terms refer to the taxes you pay on real property—your house, land, and any permanent structures attached to it.
The confusion often comes from how different documents label these taxes. Your mortgage company might call them “real estate taxes” on your escrow statement, while your local tax assessor’s office refers to them as “property taxes.” Same tax, different names.
However, there’s a technical distinction worth noting. Property taxes can technically include taxes on personal property (like boats, cars, or business equipment) in some states, while real estate taxes specifically refer only to taxes on land and buildings. But when you’re looking at your mortgage statement or Form 1098, these terms are interchangeable.
According to the Internal Revenue Service (IRS), real estate taxes are “state, local, and foreign taxes on real property,” which means the tax on your home and the land it sits on. This is what funds essential local services like schools, police departments, fire protection, road maintenance, and public libraries in your community.
How Do You Know How Much Your Property Tax Is?
Finding out your property tax amount is simpler than you might think. Here are several reliable ways to discover what you owe:
Check Your Mortgage Statement: If you have an escrow account with your mortgage lender, your monthly payment includes property taxes. Your annual mortgage statement will break down exactly how much goes toward real estate taxes each year.
Review Your Tax Assessment Notice: Local tax assessors send annual notices showing your property’s assessed value and the tax amount due. Keep an eye on your mailbox, typically in late spring or early summer, depending on your location.
Visit Your County Assessor’s Website: Most counties now offer online portals where you can search for your property using your address or parcel number. Websites like your county treasurer’s office provide detailed tax information, payment history, and upcoming due dates.
Look at Form 1098: If you paid property taxes through your mortgage company, you’ll receive IRS Form 1098 from your lender by January 31st each year. This form shows the total real estate taxes paid on your behalf during the previous tax year.
Contact Your Local Tax Office Directly: When in doubt, a quick phone call to your county or municipal tax assessor’s office can provide accurate, up-to-date information about your property tax bill.
Your property tax amount depends on two main factors: your home’s assessed value and your local tax rate (often called a mill rate). The formula is straightforward:
Property Tax = Assessed Value × Tax Rate
For example, if your home’s assessed value is $300,000 and your local tax rate is 1.2%, you’d pay $3,600 annually in property taxes.
What Makes Property Taxes Go Down?
Nobody enjoys paying more taxes than necessary. The good news is that several factors can reduce your property tax burden:
Home Value Decreases: When real estate markets cool down or your neighborhood experiences declining property values, your assessed value may decrease during the next assessment period. Lower assessed value means lower property taxes.
Successful Property Tax Appeals: If you believe your home’s assessed value is too high compared to similar properties in your area, you have the right to appeal. Gather evidence like recent comparable home sales, photos of property damage, or professional appraisals. According to the National Taxpayers Union, 30% to 60% of property tax appeals succeed, depending on the jurisdiction.
Tax Exemptions and Credits: Many states offer property tax relief programs for specific groups:
- Homestead Exemptions: Available in most states, reducing your taxable property value if it’s your primary residence
- Senior Citizen Exemptions: Reduced rates for homeowners over 65
- Disability Exemptions: Tax relief for disabled homeowners
- Veteran Exemptions: Special considerations for military veterans
- Agricultural Exemptions: Lower rates for farmland and agricultural properties
Local Tax Rate Reductions: Sometimes municipalities lower their mill rates due to improved revenue from other sources, decreased budgets, or voter-approved initiatives. Stay informed about local government decisions affecting property tax rates.
Home Improvements Reconsidered: If you completed major renovations that increased your assessment but later removed those improvements (like taking down an addition), your assessed value might decrease upon reassessment.
Correcting Assessment Errors: Mistakes happen. If your tax assessor recorded incorrect information about your property—wrong square footage, an extra bathroom that doesn’t exist, or listing a finished basement when it’s actually unfinished—correcting these errors can lower your taxes.
According to the Tax Foundation, median property taxes in the United States vary significantly by state. New Jersey has the highest median property tax bill at around $9,000 annually, while Alabama has one of the lowest at approximately $900. Understanding your state’s position helps you evaluate whether your property taxes align with regional norms.
Is Real Estate Taxes and Property Taxes the Same?
Let’s clear this up once and for all: yes, real estate taxes and property taxes are the same when discussing residential homeownership and mortgage documents.
The IRS uses “real estate taxes” on official forms like the 1098 and Schedule A (for itemized deductions). Your mortgage company likely uses the same terminology. Meanwhile, your local government probably calls them “property taxes” on bills and assessment notices.
Both terms describe the levy imposed by local governments (counties, cities, school districts, and special districts) on real property. These taxes fund crucial community services and infrastructure that directly benefit property owners and residents.
The only time you might encounter a meaningful distinction is in states that also tax personal property separately—items like vehicles, boats, or business equipment. In those cases, “property tax” could theoretically include both real and personal property taxes. However, in everyday homeowner conversations and documentation, the terms are synonymous.
1098 Real Estate Taxes vs Property Taxes
Form 1098, officially called the “Mortgage Interest Statement,” is a tax document your mortgage lender sends you annually. It reports the mortgage interest you paid during the year—and yes, it also includes real estate taxes paid through your escrow account.
On Form 1098, you’ll find:
- Box 1: Mortgage interest received (typically the largest number)
- Box 5: Mortgage insurance premiums
- Box 10: Real estate taxes paid through escrow
That Box 10 figure represents your property taxes—the same ones your local government collects. There’s no difference between “1098 real estate taxes” and the property taxes on your county tax bill. The 1098 simply reports what your lender paid on your behalf from your escrow account.
This distinction matters for tax filing purposes. When you itemize deductions on Schedule A of your federal tax return, you can deduct state and local taxes (SALT), including real estate taxes, up to $10,000 ($5,000 if married filing separately) as of current tax law.
Real Estate Taxes on Tax Return
Understanding how real estate taxes affect your tax return helps you maximize potential deductions and avoid overpaying the IRS.
The SALT Deduction: The State and Local Tax (SALT) deduction allows you to deduct certain taxes paid to state and local governments, including:
- Real estate taxes on your primary home
- Real estate taxes on a second home
- State and local income taxes (or sales taxes)
Since the Tax Cuts and Jobs Act of 2017, there’s a $10,000 cap on total SALT deductions ($5,000 for married filing separately). This means if you paid $8,000 in property taxes and $4,000 in state income taxes, you can only deduct $10,000 total, not the full $12,000.
How to Claim the Deduction: You must itemize deductions using Schedule A (Form 1040) to claim real estate taxes. This only makes sense if your total itemized deductions exceed the standard deduction, which for 2024 is $14,600 for single filers and $29,200 for married couples filing jointly.
What Qualifies: According to IRS Publication 530, you can deduct real estate taxes imposed on you that you actually paid during the tax year. This includes taxes paid through your mortgage escrow account or paid directly to the tax authority.
What Doesn’t Qualify: You cannot deduct:
- Transfer taxes or stamp taxes from buying property
- Homeowners association (HOA) fees
- Service charges for water, sewer, or trash collection
- Taxes for local improvements that increase property value (like sidewalks or streets), though you can add these to your home’s cost basis
What Is Real Estate Taxes on 1098?
The real estate taxes listed on Form 1098 represent the total amount your mortgage servicer paid to local tax authorities from your escrow account during the calendar year.
Here’s how it works: When you have a mortgage with an escrow account, a portion of your monthly payment goes into this account. Your lender then uses these funds to pay your property taxes (and homeowners insurance) when they’re due.
Why It Matters: This number is crucial for tax preparation. The amount in Box 10 of your 1098 is what you’ll report on Schedule A if you’re itemizing deductions. It provides official documentation of your real estate tax payments.
Timing Differences: Sometimes the amount on your 1098 might differ from what you calculated based on your tax bills. This happens because:
- Tax years and calendar years don’t always align
- Your lender might pay taxes late in one year that were due earlier
- Adjustments or refunds might affect the timing
- Supplemental assessments could create additional payments
Always verify that the 1098 amount matches your records. If there’s a significant discrepancy, contact your mortgage servicer for clarification.
Are County Taxes the Same as Real Estate Taxes?
This depends on what specific taxes we’re discussing. County taxes can include multiple types of levies:
County Real Estate Taxes: Yes, these are the same as property taxes. Counties assess and collect taxes on real property within their jurisdiction to fund county services like sheriff’s departments, county courts, health departments, and road maintenance.
Other County Taxes: However, counties might also collect:
- Personal property taxes (on vehicles, boats, etc.)
- County income taxes (in some states)
- Special district taxes for specific services
When someone mentions “county taxes” in the context of homeownership, they’re usually referring to the real estate tax portion. Your property tax bill often shows a breakdown: a certain amount goes to the county, some to your city or town, some to the school district, and possibly amounts for special districts (like fire protection or water districts).
For example, your total annual property tax of $5,000 might break down as:
- County general fund: $1,500
- School district: $2,500
- City services: $800
- Special districts: $200
All of these together constitute your “real estate taxes” or “property taxes,” but only a portion goes specifically to county operations.
Are Real Estate Taxes Deductible?
Yes, real estate taxes are generally deductible on your federal income tax return, subject to the limitations mentioned earlier.
Current Deduction Rules: Under current tax law:
- Real estate taxes on your primary residence are deductible
- Real estate taxes on a second home are deductible
- Combined SALT deduction (state/local income taxes plus property taxes) is capped at $10,000
- You must itemize to claim this deduction
Who Benefits Most: The property tax deduction provides the most benefit to homeowners who:
- Have significant mortgage interest and property taxes
- Live in high-tax states
- Have total itemized deductions exceeding the standard deduction
- Are in higher income tax brackets
State Tax Considerations: Some states offer additional property tax deductions or credits on state tax returns. Check with your state’s department of revenue or a tax professional to identify state-specific benefits.
Documentation Requirements: Keep all documentation, including:
- Form 1098 from your mortgage lender
- Receipts if you paid taxes directly to the tax authority
- Assessment notices showing the tax amounts due
- Cancelled checks or bank statements showing payment
The IRS may request these documents if they examine your return, so maintain organized records for at least three years after filing.
What Is Real Estate Taxes on Mortgage?
When you hear “real estate taxes on mortgage,” this refers to the property tax component of your monthly mortgage payment when you have an escrow account.
How Mortgage Escrow Works: Your monthly payment typically includes four components (often called PITI):
- Principal (loan repayment)
- Interest (lender’s charge)
- Taxes (real estate taxes)
- Insurance (homeowners insurance and possibly mortgage insurance)
Your lender estimates annual property taxes, divides by 12, and collects that amount monthly. These funds sit in your escrow account until tax payments are due, at which point your servicer pays the tax authority directly.
Annual Escrow Analysis: Federal law requires mortgage servicers to conduct annual escrow analyses. They review:
- Actual tax amounts paid in the previous year
- Expected tax amounts for the coming year
- Your current escrow balance
If taxes increased, your monthly payment might go up. If they decreased or your escrow account has excess funds, your payment might decrease or you could receive a refund.
Benefits of Escrow: Having taxes included in your mortgage payment offers several advantages:
- Automatic payment (no risk of forgetting and incurring penalties)
- Budgeting simplicity (one payment covers multiple expenses)
- Lender assurance (they know taxes are paid, protecting their collateral)
Drawbacks: Some homeowners prefer paying taxes directly because:
- They can earn interest on money until tax payment is due
- They have more control over payment timing
- They avoid potential escrow shortage situations
Many lenders require escrow accounts for loans with less than 20% down payment. Once you have sufficient equity, you might have the option to eliminate escrow and pay taxes directly.
Do you need homeowners insurance if you have a mortgage?
Where Do I Find My Real Estate Taxes?
Finding your property tax information is essential for budgeting, tax preparation, and understanding your homeownership costs. Here are the best places to locate this information:
Your Mortgage Statement: If you pay through escrow, your monthly mortgage statement shows the escrow account breakdown. Your annual statement provides year-end totals for all taxes paid.
County Tax Assessor’s Website: Most counties maintain online databases where you can search by:
- Property address
- Owner name
- Parcel number (APN)
- Tax ID number
These portals typically show current assessed value, tax rates, amounts due, payment history, and upcoming deadlines.
Tax Bills: Property tax bills arrive by mail, usually twice yearly or quarterly depending on your location. They detail:
- Assessed property value
- Applicable tax rates
- Total amount due
- Payment deadline
- Where and how to pay
Form 1098: Your mortgage servicer sends this form by January 31st, reporting mortgage interest and real estate taxes paid during the previous calendar year.
Property Deed or Settlement Documents: When you purchased your home, your closing documents included property tax information, showing prorated amounts you paid at closing.
State and Local Government Websites: Resources like:
- Your state’s Department of Revenue
- County treasurer’s office website
- Municipal or town clerk’s office
- Local tax collector’s office
Property Tax Apps and Services: Several third-party services aggregate property data, though official county sources are most reliable.
Contact Officials Directly: When online resources fall short, call:
- County Assessor’s Office: For assessment values and how they’re calculated
- County Treasurer or Tax Collector: For payment amounts, due dates, and payment options
- Your Mortgage Servicer: For escrow account details and payment confirmations
The Connection Between Property Insurance and Property Taxes
While property insurance and property taxes are separate expenses, they’re interconnected in important ways:
Escrow Accounts: Many mortgage lenders require both property insurance and property taxes to be paid through escrow, ensuring these critical obligations are met and protecting their investment in your property.
Lender Requirements: Most mortgage lenders require proof of adequate property insurance as a condition of your loan. Similarly, failure to pay property taxes can jeopardize your lender’s collateral, which is why they often insist on escrowing these payments.
Home Value Protection: Property insurance protects against damage, loss, or liability, helping maintain your home’s value. Property taxes fund services like fire departments and police protection that also protect property values and community safety.
Tax Deductibility: While property taxes are tax-deductible (with limitations), property insurance premiums for your primary residence generally are not—unless you use part of your home for business purposes.
Financial Planning: Both expenses should factor into your homeownership budget. A good rule of thumb is to budget 1-3% of your home’s value annually for property taxes (depending on location) and 0.5-1.5% for property insurance.
Key Takeaways for American Homeowners
Understanding property taxes helps you make informed decisions about homeownership and maximize potential tax benefits. Remember these essential points:
- Real estate taxes and property taxes are the same in most homeownership contexts
- Check multiple sources to verify your property tax amounts
- Property taxes can decrease through appeals, exemptions, market changes, or correcting errors
- Form 1098 reports real estate taxes paid through your mortgage escrow
- SALT deduction limits cap combined state, local, and property tax deductions at $10,000
- County taxes often include property taxes but may encompass other levies
- Escrow accounts simplify property tax payment but require annual monitoring
- Documentation is crucial for tax deductions and dispute resolution
Whether you’re a first-time homebuyer or a seasoned property owner, staying informed about property taxes helps you budget effectively, claim appropriate tax deductions, and avoid surprises. Your local government depends on these taxes to provide essential services, and understanding how they work empowers you to be a more knowledgeable participant in your community.
Have questions about your specific property tax situation? Don’t hesitate to reach out to your county assessor’s office, mortgage servicer, or a qualified tax professional. They can provide personalized guidance based on your unique circumstances and local regulations.