What Is a Property Tax Assessment?
A tax assessment is the official value your local government assigns to your property to determine how much you owe in property taxes. Think of it like this: if the market value is the price your home could sell for, the assessed value is the specific "price tag" the government uses to calculate your bill. A higher assessed value means a higher tax bill, which is why it's paramount to ensure yours is fair and accurate.
This guide will break down exactly how this process works, from understanding the key terms to what you can do if you believe your assessment is too high.
The Difference Between Market and Assessed Value
Term | Definition | Key Point |
|---|---|---|
Market Value | The price your home would fetch if sold today in the open market | Reflects supply, demand, condition, and location |
Assessed Value | The value the assessor assigns for tax purposes | It’s often a fraction of market value, based on a state or local assessment ratio |
In some states, the assessed value equals 100% of the market value (e.g., Texas). In others, the assessor multiplies by a fixed assessment ratio, such as 40%, 50%, or 80%.
For example, if your home's market value is $400,000 and your town uses a 50% assessment ratio, your assessed value would be $200,000.
Furthermore, some states, such as New York, have different ratios depending on the property type, or they'll cap how much your assessed value can increase each year, even if the market rises steeply.
Why the difference matters:
A low assessment ratio can help reduce tax burden.
If your market value is rising fast but your assessed value lags behind, that’s a buffer (but only temporarily).
When assessments increase after revaluation, the sudden change is more noticeable than gradual market shifts.
Why Tax Assessments Exist
Property taxes are a hidden cost of owning a home or commercial building, and they sometimes feel like a punishment. However, local governments collect taxes to fund schools, road maintenance, and other essential services.
Tax assessments allow the government to spread the burden of those taxes among all property owners in the area. Once your assessment is complete, the assessor’s office uses the valuation to determine how much you should pay in property taxes for the year.
How Property Assessments Affect Your Tax Bill
Your assessment directly affects your property tax bill — the higher the assessed value, the more you will owe. Knowing how assessments work enables you to calculate your taxes before receiving your bill.
The Formula: Assessment x Mill Rate
Your tax bill is calculated in two simple steps:
Step 1: Find Your Property's Taxable Value. This is your home's Assessed Value (which we just discussed).
Step 2: Multiply it by the Local Tax Rate. Your local government (city, county, school district) sets a tax rate each year to fund public services. This rate is often called a "millage rate" or "mill rate."
A mill is simply $1 of tax for every $1,000 of assessed value. So, a tax rate of "20 mills" is equivalent to 2%.
Let's See an Example:
Imagine your home has a market value of $300,000.
Step 1: Your town uses an assessment ratio of 80%.
$300,000 (Market Value) × 0.80 (assessment ratio) = $240,000 (Assessed Value)
Step 2: Your local tax rate is 25 mills (which is 2.5%, or 0.025)
$240,000 (Assessed Value) × 0.025 (Tax Rate) = $6,000 (Annual Property Tax)
Why Your Tax Bill May Rise or Fall
The real estate market is constantly changing, and so is your assessed value over time. As a result, your tax bill may increase or decrease.
Property tax increases are usually the result of a change to the local rate or an increase in your assessed value, possibly due to a strong real estate market or recent property improvements. On the other hand, a declining housing market or damage to your property can result in a lower bill.
How Often are Property Assessments Performed?
The frequency of property assessments varies by jurisdiction:
Annually: Some counties reassess every year to keep values current
Biennially / Every 2 Years: Many states use a 2-year cycle
Every 5 Years or More: Others only revalue every 5 years
When the assessor does a revaluation, you may see larger valuation changes than in years with no reassessment. Always check your local assessor’s schedule to determine when your next reassessment will occur — you’ll want to be prepared ahead of time if property values shift.
How Assessments Impact Exemptions
You may be eligible for property tax exemptions, which can reduce your assessed value and lower your tax bill. Although the assessed value of your home usually won’t disqualify you for an exemption, an over-assessed property will often see less of a benefit. This is especially true if the exemption is a set amount rather than a proportion of your bill.
Exemptions are available for various property owners, including senior citizens, individuals with disabilities, and veterans. However, you won’t receive them automatically and will need to apply if you're eligible.
Ownwell can help homeowners apply for homestead exemptions for that year and retroactively for up to two years across many U.S. states.
What if Your Assessment Seems Too High?
Local property assessment processes aren't perfect. They often use dated technology. If you believe your property's assessed value is higher than its true market value, you have the right to appeal it. This process is often referred to as a tax appeal or tax grievance.
Property tax appeals' steps vary by state, but the goal remains the same: to present evidence that shows your assessment is inaccurate. This usually involves:
Checking your assessment record for errors (wrong square footage, incorrect number of bathrooms, etc.).
Gathering evidence such as photos of property damage or recent sale prices of similar homes in your neighborhood (known as "comparables" or "comps").
Filing an appeal form with your local assessment review board before the deadline.
The key to home and commercial tax appeals is proving the assessed value doesn’t accurately reflect your property, its condition, or the state of the market. Want a complete walkthrough? For a deep dive into this process, read our expert guide on how to appeal your property taxes.
What if I Disagree With My Property Tax Assessment?
An incorrect property tax assessment can cause financial strain, as you pay extra money on your property taxes each year. This is a compounding problem. You can’t control the real estate market or other property tax factors, but you can take steps to ensure your property tax assessment is fair and accurate.
You can challenge or appeal your property tax assessment for free, and your assessed value will not go up — no matter what.
You also don’t have to go through this process alone. Whether you need to look up property tax terms in our online glossary or want help filing your appeal, the team at Ownwell is here to handle the hassle so you don’t have to.
Sign up and save on your property taxes in three minutes or less.
