What Your Home’s Assessed Value Means for Your Tax Bill

Jon Stubbs

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Jon Stubbs

September 29th, 2021
Updated September 29th, 2021

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Determining assessed value | How properties get assessed | When properties get assessed | How assessed value affects taxes | Determining property tax bills | Disputing my property's assessed value | Frequently asked questions

Assessed value is a measure of how much a property is worth for tax purposes. Tax authorities like the county government issue an assessor to determine the value of the home (along with other location-specific variables) to calculate your tax bill.

Depending on your tax district, an assessor might either visit your property or use public data to perform the assessment.

✍️ What do we mean when we talk about assessments?

"Assessment" can also refer to:

  • The tax rate — the annual rate at which your property will be taxed

  • The tax liability — the total amount on your tax bill

  • The actual property assessment — done by a government tax assessor

Assessed value is used only for tax purposes. It isn't the same as market value or appraised value:

  • Market value is the fair price at which you can list a house on the open market.

  • Appraised value is the value of a given home based on a professional appraiser's estimation.

Does your home's assessed value seem wrong?

If the assessed value of your home is much lower than you think it's worth, don't worry. The assessed value won't affect your home's listing price — nor any applications for a mortgage refinance or home equity line of credit.

Assessed value is often lower than the market value, which is determined by comparing the home with others in the neighborhood that have sold recently. So if you're considering buying a home and see a disparity between the asking price and the assessed value, it's not necessarily a red flag.

How assessed value is determined

Market value vs. assessed value | Appraised value vs. assessed value | Assessment methods

The assessed value is calculated by multiplying the home's fair market value by the local assessment rate.

The assessment rate, which is how much of your home's value is subject to taxation, is a key factor in figuring out assessed value. So if a local assessment rate is 50%, only half of a property's market value is used when calculating its assessed value.

(assessment rate / 100) × market value = assessed value

Assessment rates vary by area, and many states permit counties to set their own rates. For example, Mississippi's assessment rate is 10% of the market value, while Connecticut's is 70%.[1],[2]

The assessment rate is one reason why assessed value is distinct from — and often less than — market value or appraised value.

» MORE: How to find your local tax assessment rate

Market value vs. assessed value

Just looking at a property's assessed value won’t necessarily give you an accurate representation of its current market value.

Assessed value is often only a percentage of the market value, and the property may have been assessed a year ago, when market conditions were quite different.

Market value is determined by current market conditions, like the supply of available homes for sale compared with the demand of buyers shopping for a house.

Other things that affect market value include:

  • Condition of the home
  • Curb appeal
  • Number of rooms
  • Square footage
  • Energy efficiency
  • Age of home
  • Location

When deciding on a listing price, sellers and their agents look at all of these factors along with current data, such as comparable houses that have recently sold in the neighborhood.

Assessed value may be out of sync with current market trends, so it isn't considered when setting a fair market price.

Appraised value vs. assessed value

An appraisal estimates the market value of the home, while an assessment determines the amount you’ll pay in taxes.

Appraisals are ordered by:

  • Banks that want to protect their investments by ensuring they have placed an accurate value on the home
  • Insurance companies that need to determine the property value for homeowners’ policies
  • Sellers and agents who want to set a fair price for the home

Appraised value is determined by independent, licensed appraisers, who can provide an unbiased, authoritative opinion on a home's value.

An assessment, on the other hand, is conducted by a government worker from the county assessor’s office.

Appraisers usually visit a property for an in-depth look at the home, making sure all valuable elements are captured in their estimate.

Assessors often operate remotely, relying on public data to assess all of the properties in a tax jurisdiction at once. If they do visit a property, they likely won’t enter the home.

Methods assessors use to determine market value

Different tax jurisdictions have different methods, but assessors generally use three common methods to arrive at the market value for a given property.

  • Sales evaluation: looking at sales of similar homes in the same area, making adjustments for improvements to the home, such as additions or renovations
  • Replacement cost: considering how much it would cost to replace the home if it were destroyed, taking into account depreciation for older homes
  • Income value: taking into account how much the property would be worth as a rental property, minus costs of maintenance

Some tax districts use a combination of two or three of these methods.

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When are properties assessed?

Most counties assess property value every one to five years. A change in ownership, a mortgage refinancing, or filing permits for home renovations can also sometimes trigger an assessment.

Some states — such as Arizona, Georgia, and Michigan — mandate property annual reassessments. Others leave timing up to local tax authorities.

If property values are rising in your area, a reassessment could mean a higher tax bill. Homeowners in areas with annual assessments might see a slight increase each year — that bump might be larger in areas with five-year assessments.

Of course, tax bills only go up if property values rise. If you think that your home has actually lost value and you're not due for an assessment anytime soon, you can request a reassessment from your local tax authority.

How different will the next assessment be?

Your next assessment will be higher or lower depending on changes in the housing market and any improvements you’ve made to the home.

If property values are dipping in your area and you haven't made any recent renovations, your next assessment might be the same or even lower.

If you add on to your home — increasing the square footage — while housing prices are rising, an assessment in the near future will likely have you paying more in taxes.

And, of course, all of this depends on the rate at which properties are assessed in your area.

Let’s say assessments happen every three years in your location. You might build an addition in year one during a booming market, then watch as property rates take a nosedive during year two. When it’s time for the assessment, the assessor will need to figure out if your addition is worth more or less than the drop in market value.

Tax limitation laws can help reduce your tax increase liability

Some jurisdictions have laws that limit how much assessed values can increase in a given year. These tax limitation laws usually apply to homestead properties (those in which the owner lives) and sometimes factor in inflation.

  • In Arkansas, homesteads cannot be assessed for more than 5% each year.
  • In Maryland, homesteads cannot be assessed for more than 10% above the previous assessment, but local governments can make that cap even lower if they wish.
  • In Michigan, assessed value for a homestead cannot increase more than 5% or more than the rate of inflation — whichever is less.[3]

Tax limitation laws are meant to protect homeowners from being priced out.

While a home's property value may rise with the tide of a booming market, homeowners don't necessarily reap the benefits of that higher value unless they sell or borrow against their home's equity. So if a homeowner's income stays the same while the tax bill rises, they may be effectively priced out of their own property.

What buyers need to know about assessed value and taxes

If you compare two homes in the same neighborhood, the one with a higher assessed value will have a higher tax bill. But that's only part of the tax picture.

Important factors to consider when estimating taxes for a house are the:

  • Assessment rate: how much of the house's value will be taxed
  • Mill rate: taxes applied to the assessed value of a property

The assessment rate and the mill rate vary greatly by area, and assessment rates can range from 10–100% of the home's value.

So two houses with identical assessed values but located in different jurisdictions might have drastically different tax bills.

» LEARN: How to find your property tax rates

How property tax bills are calculated

How tax rates are determined | Property tax calculator | How to find your local tax rates | Factors that affect property tax bills

To figure out your tax bill, take your assessed value and multiply it by the tax rate.

assessed value x property tax rate = property taxes

Tax rates are expressed in mills, which equal one-tenth of one cent. For every $1,000 in value, one mill of taxes equals $1.

Property tax calculator

How to find your local tax rate

Local tax rates and assessment rates are usually easy to find on your county tax assessor’s website. Or you can find its phone number on the web and give them a call. Your best bet is to Google "(County Name) property taxes."

The county tax assessor's office often provides resources to find out the tax rates for your city or municipality and your local school district. For example, Chester County, Pennsylvania, notes the county-wide tax of 4.551 mills, not including township and school district taxes.

Depending on which school district and municipality you live in, your total tax rate may range 27 to 58 mills.

Factors that affect property tax bills

Most jurisdictions allow for certain tax exemptions.

For example, a homestead exemption means that you'll pay less in taxes if you own the property that's your main residence. Farmstead exemptions work the same way for working farms.

Note that many tax jurisdictions do not automatically apply these exemptions. Home and farm owners should visit their county assessor's website for more information about how to apply.

Commercial properties are often taxed differently than residential or agricultural properties, as well. Churches and other properties used for spiritual or religious purposes are tax exempt.

Other factors that can affect your taxes include:

  • Property size
  • Construction type
  • Age
  • Location

How tax rates are determined

Local taxing authorities levy taxes when they need money to fund roads, schools, or anything else they determine to be important. Cities, counties, and school districts are all empowered to collect taxes from properties within their boundaries.

Let's say that a school district needs $1 million in operating costs per year. If the total assessed property value in their jurisdiction is $100 million, they know that it will take a 1% tax levy (or 10 mills) to raise that revenue.

In this area, the school tax would equal 10 mills. But the county and municipality also impose their own taxes. All of these mill levies add up to the total mill rate that is used to calculate the tax bill.

Authorities
Taxes (mills)
School
10
County
15
Municipality
15
TOTAL
40 mills

Disputing your assessed value

Requesting a reassessment

If you disagree with your assessment, you can contact your local tax authority and learn more about your options. In most jurisdictions, you have 30 days from receipt of the tax bill to formally request a reassessment.

Before you file for a reassessment, make sure that the tax authority has the correct data on your home and report any errors. If, for example, the property is miscategorized as a commercial or rental property, your tax rate could be off.

Be sure to talk to your neighbors about their tax bills as well. Find other people in your neighborhood with similar homes and compare your tax bill to theirs.

What if you still disagree with the reassessment?

If you are unable to change the tax authority's mind after a formal reassessment, you can appeal to an independent board, court of common pleas, or tax court depending on the local guidelines.

It may be helpful to hire a lawyer for this process, so you'll have to decide if the cost of an attorney would be worth it in your situation. You may also need to pay a filing fee.

You can hire your own appraiser to present their opinion to the county board or judge. Professional appraisals cost between $300 and $400, with the average appraisal costing $339 for a single-family home.

If many people are challenging their taxes, your district may have a backlog of tax cases, so you could wait up to a year or more before a decision is reached in your reassessment case.

Frequently asked questions

</p><p dir="ltr">Assessed value is used only for tax purposes. Market value is the fair price at which you can list a house on the open market. Market value is used to calculate assessed value, but depending on local taxes, assessed value is often lower. <a href="#market-vs-assessed-value" onclick="globalTOCClick('#market-vs-assessed-value');" data-link-type="jump-link">READ MORE</a></p><p dir="ltr">

</p><p dir="ltr">A government assessor from your local tax authority will use public data to assess all the properties in a tax jurisdiction. Sometimes, they'll take sales evaluations, replacement costs, and income value into account. <a href="#how-properties-get-assessed" onclick="globalTOCClick('#how-properties-get-assessed');" data-link-type="jump-link">READ MORE</a></p><p dir="ltr">

</p><p data-empty="true">Properties usually get assessed on a semi-regular basis, whether that's annually or every five years. But certain events, like a sale or major renovation, can trigger a reassessment. <a href="#when-properties-assessed" onclick="globalTOCClick('#when-properties-assessed');" data-link-type="jump-link">READ MORE</a></p><p dir="ltr">

</p><p data-empty="true">Assessed values are listed in public records available through the county government portal. Search for your local county assessor’s office to start looking.</p><p dir="ltr">

</p><p dir="ltr">If you think your property has been incorrectly assessed, contact your county assessor’s office within 30 days of receiving your tax bill to formally request a reassessment. <a href="#disputing-assessed-value" onclick="globalTOCClick('#disputing-assessed-value');" data-link-type="jump-link">READ MORE</a></p><p dir="ltr">

</p><p dir="ltr">Your home's assessed value is its market value multiplied by the local tax rate. In a county that uses a 50% tax rate, the assessed value would be half of the home's market value. <a href="#assessed-value-determined" onclick="globalTOCClick('#assessed-value-determined');" data-link-type="jump-link">READ MORE</a></p><p dir="ltr">

ARTICLE SOURCES
[1]

State of Mississippi Department of Revenue. "Ad Valorem Tax." Accessed September 22, 2021.

[2]

Fairfield, Connecticut Webpage. "Real Estate Assessments." Accessed September 22, 2021.

[3]

Fiscal Research Center, Georgia State University. "Property Tax Limitations." Accessed September 22, 2021.

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