The two local taxes that reach the most people in the United States are property tax and sales tax, and in some places a local income or wage tax and special assessments show up as well. Each is authorized by state law and collected by a county, city, school district, or special district to pay for schools, roads, emergency services, and other community needs. Property taxes alone account for roughly 30 percent of all local government general revenue, and local sales taxes operate in 38 states as of 2026.
Property Tax
Property tax is an ad valorem tax, meaning it is based on the value of what you own. Local governments tax two broad categories. Real property is land and anything permanently attached to it, such as a house, a commercial building, or a warehouse. Personal property covers movable items like business equipment, inventory, and in some jurisdictions registered vehicles.
A local assessor estimates what your property would sell for on the open market, then applies an assessment ratio set by state law. Some states assess property at full market value; others use a fraction. The resulting assessed value is what your bill is calculated on, not the price you paid or what you think the home is worth.
Revenue funds services close to daily life: public school districts, fire departments, law enforcement, road maintenance, and local parks. Owners of higher-value holdings pay more. Many owners never write a check directly to the tax collector, because their mortgage lender collects a portion each month through an escrow account and pays the bill on their behalf. Even with escrow, you are still responsible for making sure the payment reaches the taxing authority on time.
How the Bill Is Calculated
Rates are expressed in mills. One mill equals one dollar of tax for every $1,000 of assessed value. A home assessed at $200,000 with a total millage rate of 25 mills produces an annual tax of $5,000. Your bill may list several millage rates stacked together, one each for the county, the school district, a fire district, and so on, and you pay the combined total. Most jurisdictions split the annual amount into two or more installments, paid to the county tax collector or treasurer online, by mail, or in person. Keep your receipts as proof of payment and for federal tax time if you itemize.
Exemptions and Relief
Most states offer a homestead exemption that lowers the taxable value of your primary residence. You generally need to own the home, live in it as your main residence, and file an application with your local appraisal district or assessor’s office. The exemption removes a set dollar amount or percentage from the assessed value before the tax rate is applied.
Additional relief is common for seniors, disabled residents, and veterans. Senior programs typically apply somewhere between age 61 and 65, depending on the state, and may include income limits. Some freeze your assessed value or tax amount so it will not rise with the market. Each program usually requires its own application, and a missed filing deadline generally means waiting another year.
Challenging an Assessment
If you believe your property has been overvalued, you can challenge the assessment. The process usually starts with an informal conversation at the assessor’s office, backed by evidence such as recent sale prices of comparable homes, an independent appraisal, or photographs showing damage or condition problems. If that does not resolve the issue, you can file a formal appeal with your county’s board of review, board of equalization, or value adjustment board, typically within 30 to 90 days of receiving your assessment notice. Most states allow a further appeal to a state tax tribunal or local court.
If You Do Not Pay
Unpaid property taxes become a lien against the property, meaning the government has a legal claim on it. Penalty and interest rates for delinquent taxes generally range from about 1 percent to 12 percent, depending on the jurisdiction and how long the bill is unpaid. If the debt remains unresolved, the local government can sell the lien to a third party or sell the property itself at a tax sale. Timelines vary: some states allow as little as one year before loss of the property, while others provide several years of redemption during which you can pay the back taxes plus penalties to reclaim it. Many jurisdictions offer installment plans if you contact them before the process advances.
Local Sales and Use Tax
Sales tax is the other local tax you are most likely to see. The state sets a baseline rate, and in 38 states cities and counties can add their own percentage on top. Local add-ons typically range from 0.25 percent to several percentage points, and in some areas the local share rivals the state rate. The five highest combined state-and-local rates in 2026 are in Louisiana (10.11 percent), Tennessee (9.61 percent), Washington (9.51 percent), Arkansas (9.46 percent), and Alabama (9.46 percent).1Tax Foundation. State and Local Sales Tax Rates, 2026 You see the combined rate on your receipt every time you buy a taxable good or service.
A related charge called use tax fills a gap. If you buy something in a lower-tax area, or from an out-of-state seller who does not collect your local tax, your home jurisdiction can require you to pay the difference. Enforcement commonly happens when you register a vehicle, boat, or other high-value item, since the registration process typically requires proof that sales or use tax was paid.
Not everything is taxed. Roughly 37 states exclude unprepared groceries from their state sales tax, though local rules can differ. Prescription medications are another widely exempted category. Some jurisdictions also exempt clothing, medical devices, or items purchased for resale by businesses. Prepared food and restaurant meals are usually taxable even in states that exempt groceries. State departments of revenue publish detailed exemption lists online.
Local Income and Wage Taxes
Some jurisdictions also levy a local income or wage tax. These are most common in large cities and certain states. About 600 municipalities in Ohio impose one, Philadelphia has collected a wage tax since 1939, and New York City applies a personal income tax with rates ranging from roughly 3.08 percent to 3.88 percent depending on income.2Office of the New York City Comptroller. The NYC Personal Income Tax Before and After the Pandemic Where these taxes exist, your employer typically withholds them from your paycheck automatically.
Special Assessments
Local governments may also impose special assessments, which are charges tied to a specific improvement that benefits your property, like a new sewer line or sidewalk. Unlike general property taxes that fund broad services, a special assessment pays for a defined project and usually ends once the project cost is repaid. These charges can appear on your property tax bill alongside your regular taxes, so review each line item to understand what it covers.
Deducting Local Taxes on Your Federal Return
If you itemize on your federal return, you can deduct local property taxes and either local income taxes or local sales taxes, but not both income and sales taxes in the same year.3Internal Revenue Service. Topic No. 503, Deductible Taxes You choose whichever gives you the larger deduction. The election is made on Schedule A of Form 1040 by checking the appropriate box.4Internal Revenue Service. Instructions for Schedule A (Form 1040)
All state and local tax deductions combined, property plus income or sales, are subject to a cap known as the SALT limit. For the 2025 tax year, the cap is $40,000 for most filers, or $20,000 if married filing separately.3Internal Revenue Service. Topic No. 503, Deductible Taxes The cap phases down if your modified adjusted gross income exceeds $500,000 ($250,000 if married filing separately), but it will not drop below $10,000 ($5,000 if married filing separately).4Internal Revenue Service. Instructions for Schedule A (Form 1040) The 2026 figure may be adjusted for inflation; check the IRS website when it is released.
The choice between the sales tax deduction and the income tax deduction matters most if you live in a state with no income tax, since the sales tax deduction may be your only option. The IRS provides tables estimating the sales tax deduction based on income and location, or you can track actual receipts through the year. Either way, the combined total of state and local taxes claimed on Schedule A cannot exceed the SALT cap.5Office of the Law Revision Counsel. 26 US Code 164 – Taxes