What Is Assessed Value and How Does It Affect Property Taxes?

If you own a home, you likely have thought about your property’s assessed value. But what is “assessed value,” exactly?

To put it simply, an assessed value is the figure a governmental entity arrives at when they analyze your home’s worth. The assessment takes into account the condition of the home, the value of similar properties and any visible updates you may have incorporated.

But there’s more to it than that — for starters, your assessed value has a direct connection to your property taxes. So below, we’ll take a look at assessed value and how it affects your property taxes.

Assessed Value Definition

Assessed value can be defined as the value or dollar amount by which the city or county determines how much you’ll pay in annual property tax. The equation is simple: the more your property is worth, the higher your property taxes will be.

There are a few things to keep in mind when you consider your assessed value:

• The assessed value of your home is typically different from the market value of your home.
• The tax assessed value of your house can change every year based on current tax rates for your state/county.
• This figure is not based on home improvements or features.

Assessed Value Vs. Market Value

While they may seem similar, assessed value and market value are two very different figures, and they vary for every type of property. This is because the market value of a house takes into consideration variable factors, including:

• The features of the property
• Any upgrades (including new garage doors, a deck or a primary suite addition) made to the home
• The average price of comparable homes in your area
• Perceived value of the location

Assessed Value Vs. Appraised Value

As discussed, assessed value is determined by local governments for tax purposes and is based on standardized assessments with criteria such as property size and location. Notably, it also may not align with market value.

Appraised value, on the other hand, is determined by licensed appraisers who consider factors such as property condition, recent sales and market trends in their evaluation. Unlike assessed value, which is primarily for taxation purposes, appraised value helps buyers and sellers set fair prices in real estate transactions. Factors like renovations or market fluctuations, which can impact appraised value, might not have any impact on assessed value.

Indeed, getting a home appraisal has many benefits: it can help you if you appeal a property value assessment because the appraisal provides an independent and professional evaluation of the property’s market worth. If the assessed value seems inaccurate or unfairly high compared to the market value determined by the home appraisal, it can serve as strong evidence in an appeal.

How to Calculate Property Taxes with Assessed Value

One of your biggest expenses as a homeowner — and an important reason to learn about assessed value — is property taxes. These taxes are affected by your “mill rate,” or millage, which has a profound impact on your property taxes.

The mill rate is used to calculate property taxes based on the assessed value of the property, and it represents the tax owed per dollar of a property’s assessed value. For instance, a mill rate of 10 means $10 in tax is charged for every $1,000 of the property’s assessed value.

To calculate your mill rate, you’ll need to know the following information:

• The assessed property value by the local government for taxation purposes
• The mill rates set by the relevant taxing authorities

Once you’ve determined the total number of mills, multiply it by your property’s assessed value, then divide the answer by 1,000.

(Total mill rate x Property’s tax assessed value)/1,000

How To Appeal A Property Value Assessment

Despite this widely accepted formula, sometimes homeowners believe their property’s tax-assessed value is unreasonably high. That’s when they’ll file an appeal in an effort to pay lower taxes.

Here’s how you appeal a property value assessment:

1. Understand the assessment process: Knowledge is power, so be sure to familiarize yourself with how property assessments are conducted in your area. Learn about the factors that influence property valuations and understand the specific criteria used by your local assessor’s office.
2. Gather evidence: Collect evidence to support your appeal. This may include recent comparable property sales in your neighborhood, documentation of any structural issues or damages affecting your property’s value, or evidence of errors in the assessment such as incorrect property dimensions.
3. Review assessment details: Carefully review the details of your property assessment provided by the assessor’s office. Check for any discrepancies or errors in the assessment report that could potentially impact your property’s valuation.
4. File the appeal: Follow the procedures outlined by your local assessor’s office. This typically involves submitting a formal appeal application along with supporting documentation within a specified timeframe. Be sure to adhere to all deadlines and requirements to ensure your appeal is considered.
5. Attend the hearing (if applicable): If your appeal proceeds to a hearing, prepare to present your case in front of the appeals board or hearing officer. Bring copies of your evidence and be ready to explain why you believe your property’s assessment is incorrect.

The Bottom Line: Assessed Value Impacts Property Taxes

Your home’s assessed value is essentially the monetary worth assigned to your property by local government assessors for taxation purposes. They base their evaluation on factors such as property size, location and condition. This assessed value directly influences the amount of property taxes you are required to pay, with higher assessed values typically resulting in higher tax bills.

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