Common examples of local taxes include property taxes on real estate, local add-on sales taxes, hotel and meals taxes, utility taxes, wage or income taxes in certain states, and real estate transfer taxes charged when a property changes hands. Cities, counties, school districts, and special districts use these to fund the services you interact with daily: schools, police and fire protection, roads, and water systems. The mix varies by state, because state constitutions and enabling legislation decide which taxes local governments can impose and how high the rates can go.
Property Taxes
Property tax is the single largest revenue source for most local governments and the local tax nearly every homeowner pays directly. It’s levied annually on real property (land and whatever is permanently built on it) based on the property’s value.
Your bill starts with the local assessor estimating fair market value. That figure is multiplied by an assessment ratio to produce the assessed value, which is what the tax rate actually applies to. Ratios vary widely: some jurisdictions assess at 100% of market value, others use ratios as low as 10% or as high as 50%. Neither number alone tells you much; the combination is what matters.
How often values get updated also varies. Some states require annual reassessment, others reassess every two to six years, and a handful allow gaps of up to ten years between revaluations.1Tax Foundation. State Provisions for Property Reassessment A few states have no mandatory schedule at all. If you’ve owned your home a long time in a jurisdiction with infrequent reassessments, your assessed value may sit well below current market value, which keeps your taxes lower but can produce sticker shock when a revaluation finally happens.
Millage Rates
Property tax rates are usually expressed in mills. One mill equals one dollar of tax for every $1,000 of assessed value. If your local millage rate is 30 mills and your home’s assessed value is $200,000, you multiply 200 by $30 for a $6,000 annual tax bill.
Several overlapping taxing bodies each set their own millage rate: the county, the city or township, the school district, and sometimes a library or park district. Your total bill is the sum of all those rates applied to your assessed value. School district levies typically make up the largest share, which is why ballot measures asking to approve a new millage are so often school-related.
Personal Property Taxes
Some jurisdictions also tax tangible personal property. For businesses, this usually covers machinery, equipment, furniture, and sometimes inventory. Fourteen states have eliminated tangible personal property tax entirely, and several others exempt small amounts of business property from the rolls.2Tax Foundation. Tangible Personal Property De Minimis Exemptions by State, 2025 For individuals, the most common version is a motor vehicle tax based on the car’s depreciated value, collected annually in some states as a condition of registration.
Local Sales and Consumption Taxes
Where property taxes arrive once or twice a year, sales and consumption taxes hit in small amounts every time you spend.
Local Sales Tax
Thirty-eight states allow local governments to add their own sales tax on top of the state rate. Population-weighted average local rates range from under 1% in states like Florida and Iowa to over 5% in Alabama and Louisiana, and maximum local rates in some jurisdictions exceed 7%. The nationwide population-weighted average combined state and local rate is 7.53% as of January 2026.3Tax Foundation. State and Local Sales Tax Rates, 2026
Retailers collect the full combined rate at the register and remit it to the state, which then distributes the local share back to the county or municipality. Most of that revenue flows into general funds rather than being earmarked for a single purpose.
Hotel and Lodging Taxes
Look closely at any hotel receipt and you’ll see a local lodging tax, sometimes called a transient occupancy tax. It applies to short-term stays (typically under 30 consecutive days) and is collected by the hotel, motel, or short-term rental operator. Many cities charge somewhere between 5% and 15% of the nightly room rate, though tourist-heavy destinations sometimes layer additional district surcharges on top. The revenue is frequently earmarked for tourism promotion, convention centers, or cultural programs.
Meals Taxes
Some cities charge a separate tax on prepared food and drinks bought at restaurants and bars, on top of the standard sales tax. Among the 50 largest U.S. cities, roughly a quarter charge an additional meals tax. Rates typically land between 0.5% and 2%, though a few cities charge 4% or more. These taxes are often dedicated to specific municipal projects rather than the general fund.
Utility Taxes
Many municipalities tax the use of water, natural gas, electricity, and telecommunications. The utility provider calculates the tax and includes it on your bill, structured usually as a percentage of the bill or occasionally as a fixed amount per unit of consumption. Because everyone uses utilities, the revenue base is broad and stable.
Local Income and Wage Taxes
About 5,000 jurisdictions across 16 states impose some form of local income or earnings tax.4Tax Foundation. Local Income Taxes – A Primer The count includes cities, counties, and in some states, school districts. These taxes are most common in the mid-Atlantic and Rust Belt, particularly in Ohio, Pennsylvania, Kentucky, Maryland, and New York.
Local earnings taxes are typically calculated on gross wages rather than the adjusted gross income used on your federal return, which means you don’t get to subtract deductions before the tax applies. Rates range from fractions of a percent in some school districts to nearly 4% in the highest-taxing cities. Philadelphia charges about 3.87% for residents, New York City’s top rate reaches 3.876%, and Portland’s combined local income taxes total 4%.4Tax Foundation. Local Income Taxes – A Primer A few jurisdictions charge a flat dollar amount per paycheck or per month.
The tax generally applies to residents on all their earned income, regardless of where they work. Non-residents are taxed only on wages earned within that jurisdiction’s boundaries.5Tax Policy Center. How Do State and Local Individual Income Taxes Work When someone lives in one taxing city and works in another, credits usually prevent double taxation, but the mechanics aren’t always seamless. If your employer withholds for the city where you work but you also owe your home city, you may need to file in both places and claim a credit on one return.
Real Estate Transfer Taxes
When property changes hands, many local governments collect a transfer tax based on the sale price. These are sometimes called documentary stamp taxes, deed taxes, or conveyance taxes, depending on the jurisdiction. The buyer, the seller, or both may be responsible, and the split is often negotiated in the purchase agreement. Rates are usually modest as a percentage, but on a $400,000 home sale, even a fraction of a percent translates into real money. Some cities layer a local transfer tax on top of a state-level one, and the combined rate can catch first-time buyers off guard at closing.
Special Assessments
Not every charge on your property tax bill is technically a tax. A tax funds general public services and is mandatory for everyone in the jurisdiction. A fee is a charge for a specific service you use, like a building permit, and you can avoid it by not using the service.
Special assessments fall somewhere in between. They’re mandatory charges tied to a capital improvement that directly benefits your property, such as a new sidewalk, sewer line, or streetlights. The assessment is typically calculated based on your property’s frontage or lot size, and it often appears on your property tax bill even though it’s legally separate. Unlike a general tax, the amount is tied to the measurable benefit your property receives. Assessments can be substantial for major infrastructure projects, and they sometimes allow installment payments spread over several years.
Relief Programs Worth Knowing About
Most jurisdictions offer exemptions or credits that reduce the property tax burden for certain owners. These don’t eliminate the tax, but they can meaningfully lower a bill.
- Homestead exemptions are available in most states to owners who use the property as their primary residence. The exemption subtracts either a fixed dollar amount or a percentage from your assessed value. Investment properties and vacation homes don’t qualify.
- Senior freezes and deferrals are common for residents over 65 who meet income requirements. A freeze holds the bill flat even as values or rates climb; a deferral lets seniors postpone payment until the home is sold.
- Veteran and disability exemptions can fully exempt disabled veterans with a 100% service-connected disability rating from property tax on their primary residence. Some states extend partial exemptions to veterans with lower ratings or to surviving spouses.
These programs rarely apply automatically. You usually need to file an application with the local assessor’s office and provide documentation, and many have annual deadlines. Missing the deadline means paying full taxes for that year even if you would have qualified.
If the assessed value on your property looks too high, you can challenge it. The appeal process follows a general pattern: file a formal protest with the local assessment review board within a set deadline (often 30 to 90 days after receiving your assessment notice), present evidence that the property is overvalued, and escalate to a higher body if you disagree with the decision. Recent sales of comparable properties in your neighborhood are the strongest evidence, and an independent appraisal can help for unusual properties where good comparables are scarce.