Real Estate Taxes and VA Loans: What You Need to Know

VA loans offer a great way for service members, veterans, and eligible surviving spouses to achieve their dream of homeownership. Benefits like no down payment, no private mortgage insurance, and competitive interest rates make it easier than ever to finance a home.

But while VA loans cover many costs of home buying, they don’t eliminate property taxes. If you’re looking to purchase a home as a veteran, it’s important to be educated on real estate taxes and how they can affect your monthly payments, your ability to qualify for a loan, and your long-term affordability.

At Commander Mortgage, we’re dedicated to helping veterans and their families secure VA loans. We’re also here to help you understand the ins and outs of homeownership, which is why we put together this guide breaking down how property taxes work, how they interact with VA loans, and what exemptions are available to veterans.

What Are Real Estate Taxes?

Real estate (or property) taxes are local taxes assessed by counties, cities, or towns to fund public services like schools, fire departments, and infrastructure. These expenses are typically paid annually or semi-annually. However, if you have a home loan, your lender may roll them into your monthly mortgage payments. 

The amount an individual pays in real estate taxes is based on the value of their home and the local tax rate. When budgeting for housing and considering your financing options, it’s vital to consider this ongoing cost for an accurate snapshot.

How Real Estate Taxes and VA Loans Interact

When you take out a VA loan, property taxes are usually included in your escrow account, along with your homeowners insurance. This means that your lender will take a portion of your estimated taxes and insurance every month. When your taxes are due, your lender will pay them on your behalf. 

Here’s why property taxes matter for VA borrowers:

• Debt-to-Income Ratio (DTI): Taxes are factored into your monthly housing costs, which affects how much loan you qualify for.
• Monthly obligations: Even with no down payment, property taxes can significantly raise your monthly bill.
• Future increases: If your local tax rate rises or your home is reassessed at a higher value, your payment could increase, so it’s smart to budget for the possibility.

What Borrowers Should Check Before Taking a VA Loan

An understanding of property taxes is an integral component for an accurate snapshot when considering your VA loan options and budgeting for a home.

To avoid surprises, VA borrowers should contact the local taxing authority to confirm the current property tax rate and when payments are due. You should also compare the assessed value (used for taxes) to the market value (purchase price) of the home. 

When choosing a lender, make sure you understand any escrow requirements and how your taxes will be collected. It’s also smart to leave extra room in your budget for possible tax increases.

Tax Exemptions and Relief for Veterans

The good news is that many states offer property tax relief programs for veterans. The amount of relief depends on factors like your disability rating, income level, and state residency requirements.

For veterans with VA-rated service-connected disabilities, exemptions can significantly reduce or even eliminate property tax obligations. This means lower monthly mortgage payments and more financial flexibility.

States with 100% Property Tax Exemption for 100% Disabled Veterans

If you are rated 100% permanently and totally disabled due to service-connected conditions, you may qualify for a full exemption from property taxes in the following states:

• Alabama
• Arkansas
• Florida
• Hawaii
• Illinois
• Iowa
• Louisiana
• Maryland
• Michigan
• Mississippi
• Nebraska
• New Hampshire
• New Jersey
• New Mexico
• Oklahoma
• Pennsylvania
• South Carolina
• Texas
• Virginia
• West Virginia

Keep the following factors in mind:

• Exemptions usually apply only to your primary residence.
• Some states extend the benefit to surviving spouses.
• Rules vary—some states offer full exemptions, others partial.
• Veterans must typically provide VA disability documentation to apply.
• Income, residency, or property value caps may apply depending on state law.

With a property tax exemption, eligible veterans have more budget, a lower DTI ratio, and an all in all easier qualification for their VA loans. This could mean the difference between qualifying for a home and actually being able to comfortably afford one—so exemptions are absolutely worth looking into. 

Steps for Veterans to Claim the Exemption

Ready to claim your exemption? Here’s how:

1. Confirm whether your state offers full or partial property tax exemption.
2. Check your eligibility: you typically need a VA rating letter showing permanent and total disability.
3. Gather required documents: proof of residence, VA paperwork, and property ownership records.
4. File an application with your local assessor or tax office before the deadline.
5. Renew as required. Some states require reapplication each year, while others are permanent.

And voila! You’ll be set up for thousands of dollars in savings over time.

Bottom Line

Property taxes are a key part of the financial picture when it comes to homeownership—even with the unmatched benefits of VA loans. For veterans with disabilities, state property tax exemptions can make a life-changing difference by lowering monthly obligations and keeping homeownership affordable long-term. So if you’re a veteran considering a VA loan, make sure to investigate your state’s property tax rules and apply for exemptions if  you’re eligible.

At Commander Mortgage, we specialize in helping veterans navigate VA loans and understand every financial detail—including property taxes and exemptions. Contact us today to review your options and see how state-specific exemptions can make your VA loan even more affordable.