What is the purpose of an escrow account in property tax collection?

• A. Generate interest for the municipality.
• B. Hold funds for payment of taxes when taxpayers use escrow accounts as part of their mortgage.
• C. Reduce property tax assessments.
• D. Replace tax bills with electronic statements.

Answer: (B)

Escrow accounts hold funds collected with a mortgage to pay property taxes when due. By pooling these payments, the lender can discharge the tax bill on time, which helps protect the municipality’s revenue and keeps homeowners from facing large lump-sum bills. It also makes budgeting easier for homeowners by spreading the annual tax cost over monthly payments.

That’s why this option is the best description: the main purpose is to hold funds for payment of taxes when taxpayers use escrow accounts as part of their mortgage. The other statements don’t fit the function—escrow isn’t designed to generate revenue for the municipality, to reduce tax assessments, or to replace tax bills with electronic statements.