Assessed Value

Key Takeaways
* Assessed value is the dollar amount assigned to real property for tax purposes.
* It’s often calculated as a percentage of a property’s fair market value and is used to compute property taxes.
* Local government assessors set and periodically update assessed values; owners can usually appeal or request a reassessment.
* Assessed value is different from appraised value (used for mortgages and sales).

What is Assessed Value?

Assessed value is the value a tax authority assigns to real estate (and sometimes certain personal property) to determine property taxes. It reflects factors such as comparable sales, location, size, condition, and local market conditions. In many jurisdictions, the assessed value is a fixed percentage of the property’s fair market value.

How Assessed Value Is Determined

• Local government assessors evaluate properties within specified tax districts.
• Assessment methods vary by jurisdiction, but commonly include:
• Applying an assessment rate (a percentage) to fair market value.
• Using comparable sales and neighborhood data.
• Considering property characteristics (square footage, features, condition).
• Some assessors inspect properties periodically; others rely on records and sales data.
• Owner-occupants may receive exemptions (e.g., homestead exemptions) that reduce assessed value for tax purposes.

Assessors and Appeals

• A government assessor or assessment office assigns the assessed value and updates it on a schedule set by local law.
• Property owners can typically request a reassessment or file an appeal if they believe the assessed value is incorrect. Procedures and deadlines vary by jurisdiction.

How Assessed Value Relates to Property Taxes

Property tax is generally calculated with this formula:
Fair Market Value × Assessment Rate × Millage Rate = Property Tax

Notes:
* The assessment rate is the percentage applied to fair market value to produce assessed value.
* The millage (mill) rate is the tax rate expressed per $1,000 of assessed value. One mill = $1 per $1,000 of assessed value. To use a mill rate in a standard multiplier, divide by 1,000 (e.g., 20 mills = 0.02).

Example:
* Fair market value: $300,000
* Assessment rate: 50% (0.50)
* Mill rate: 20 mills (0.02)
Calculation: $300,000 × 0.50 × 0.02 = $3,000 property tax

Personal Property Taxes

Some states tax certain personal property (e.g., vehicles, boats, mobile homes). These taxes are typically based on an assessed value assigned by the local tax authority and can vary widely by jurisdiction.

Assessed Value vs. Appraised Value

• Assessed value: Determined by the tax authority for taxation.
• Appraised value: Determined by a licensed appraiser (often for mortgage underwriting or sale negotiations).
  Both relate to market conditions, but they serve different purposes and may differ in amount.

How Often Assessed Values Change

Assessment frequency depends on local rules: some places update annually, others every few years. Market shifts, new construction, renovations, or a formal reassessment can change a property’s assessed value.

Bottom Line

Assessed value is the tax authority’s valuation of property used to calculate property taxes, commonly expressed as a percentage of fair market value. Understanding how it’s determined, how to convert mills to a tax rate, and how to appeal assessments can help property owners manage and potentially lower their tax burden.