How to underwrite property taxes when buying a rental (the seller's bill may not be yours)

Why the seller's tax bill can mislead

Property tax is usually the assessed value times a local rate. Whether a sale resets the assessed value depends on where the property is. Some places reassess on a schedule, some after a sale, and some limit how fast the assessment can rise. We do not give a rule here, because it differs by state and county. The county assessor's office can tell you.

What to ask the assessor or county site

1. What is the current assessed value, and when was it last set?
2. Does a sale trigger a new assessment, and if so, based on what?
3. What is the combined tax rate for this address (county, city, school and special districts)?
4. Are there exemptions the seller has that would not pass to a buyer?
5. Are there pending bonds, special assessments or appeals?

What it does to NOI and value

Example a made-up building sells for $900,000. The seller's bill is $9,000 a year. You learn that a sale resets the assessment to the price, and the local effective rate is 1.2% of assessed value, so your bill would be $10,800.

Example the difference is $1,800 a year of lower NOI. At a 6% cap rate, $1,800 of NOI is worth $30,000 of value ($1,800 divided by 0.06). If you had priced the deal on the seller's $9,000 bill, you would have overpaid by about that amount.

Property taxes also move your closing numbers. See prorating property taxes at closing.

Check insurance the same way

The seller's insurance bill may reflect a different policy, an older building rate or a claims history that does not follow you. Get your own quote for the same building before you make an offer.

How taxes appear on your return

Property taxes you pay on a rental are generally a rental expense. Taxes the seller owed for time before you owned the property that you pay at closing are usually treated differently, and your preparer will tell you how. See the IRS's Publication 527 and Publication 551 on basis.

What to do if the new bill is higher than you planned

• Read the assessment notice and note the appeal deadline.
• Check the property record for errors: wrong square footage, unit count or condition.
• Compare the assessed value with recent sales of similar buildings nearby.
• File the appeal on time, or ask a local tax professional to.

An appeal is not guaranteed to lower the bill, and deadlines are short in many places. The better habit is to estimate the bill before you buy and price the deal with it. If the seller's numbers use a lower tax than you expect, ask the seller to explain why and use your figure in the offer. Also check whether the bill includes special assessments, such as a street or district charge, that may be paid over several years. Those belong in your operating plan even if they are not in the tax line of the seller's T12, and they can change the value of the deal by the same arithmetic shown above. Write down the assumptions you used so you can compare them with the first real bill and learn from the difference.

How DoorKeeping fits

DoorKeeping records each property's tax bill and payments in that property's books, so after the first year you can compare actual taxes with your estimate. It does not estimate taxes or reassessments. It costs $2 per unit per month.

Sources

1. IRS, Publication 527, Residential Rental Property, read Oct 31, 2026
2. IRS, Publication 551, Basis of Assets, read Oct 31, 2026

Questions

Does a sale always raise property taxes?

No. It depends on your state and county. Ask the assessor before you make an offer.

Where do I find a property's tax history?

Usually the county assessor or treasurer has an online lookup by address. Check the current assessed value and the last change.

Can I appeal an assessment?

Most places have an appeal process with deadlines. Check the county's rules.