Definition
– Assessed value is the dollar figure a local tax authority assigns to real estate for the purpose of computing property taxes. It is typically derived from the property’s market value but adjusted by a jurisdiction-specific assessment rate.
Key terms (defined)
– Fair market value: the estimated price a property would sell for under normal conditions.
– Assessment rate: the percentage of fair market value used to set the assessed value.
– Millage rate (mill rate): the tax rate applied to assessed value. One mill equals $1 of tax per $1,000 of assessed value, so convert by dividing mills by 1,000 (e.g., 20 mills = 0.02).
– Ad valorem tax: a tax based on the value of an item—in this case, real estate.
– Reassessment: a second or updated valuation done when an owner disputes the assigned assessed value.
– Homestead exemption: an exemption that can reduce assessed value for owner-occupied homes in some places.
How assessed value is determined (overview)
1. Estimate fair market value using comparable sales and local market data.
2. Apply the local assessment rate (varies by state and locality) to that market value to produce the assessed value.
3. Apply any applicable exemptions (for example, homestead) to lower the assessed amount used for taxation.
4. Multiply the taxable assessed value by the millage rate to compute the tax owed.
Formula (simple)
– Effective property tax = Fair market value × Assessment rate × Millage rate
Note: If the millage rate is expressed in mills, convert it by dividing by 1,000.
Worked numeric example
– Fair market value: $300,000
– Assessment rate: 50% (0.50)
– Millage rate: 20 mills → 20 / 1,000 = 0.02
Calculation:
– $300,000 × 0.50 = $150,000 (assessed value)
– $150,000 × 0.02 = $3,000 (property tax due)
How assessed value relates to taxes and to appraisals
– Purpose: Assessed value is used solely to calculate property taxes. It is an administrative figure set by the tax authority.
– Appraised value: A valuation done by a licensed appraiser—often required for mortgage underwriting or sale negotiations—and may differ from the assessed value.
– Practical difference: Tax bills are based on the assessed value; mortgage lenders and buyers use appraisals to confirm market worth.
Personal property taxes
– Some states also tax certain movable property (cars, boats, mobile homes). Those taxes are usually calculated using the same assessed-value principle but follow different rules and rates.
Why assessed value matters
– It directly affects your annual property tax bill.
– It can influence negotiations when buying or selling if assessed values are far from market prices.
– It determines eligibility for some tax relief programs and exemptions.
How often assessed values change
– Frequency depends on local rules: some jurisdictions reassess annually, others every few years. Check your local tax office for the schedule and methodology they use.
Short homeowner checklist (what to do)
– Review your assessment notice as soon as you receive it.
– Compare assessed value to recent sale prices of nearby similar properties.
– Check for available exemptions (homestead, senior, veteran) and apply if eligible.
– Request the assessor’s data and methodology if something looks off.
– If you disagree, follow the local process to request a reassessment or file an appeal—observe deadlines.
– Keep records of improvements, repairs, or damages that affect value.
– Recalculate your expected tax using the formula above to budget for payments.
Practical steps to appeal an assessment (high level)
1. Gather evidence: comparable sales, photos, records of major defects, or independent appraisals.
2. Contact the assessor’s office to request a review or reassessment.
3. If unresolved, follow formal appeal procedures to your local tax board or tribunal; meet filing deadlines.
4. Attend any hearings and present your documentation.
Sources
– Investopedia — Assessed Value: https://www.investopedia.com/terms/a/assessedvalue.asp
– Mississippi Department of Revenue — Ad Valorem Tax: https://www.dor.ms.gov/Pages/Ad-Valorem-Tax.aspx
– State of Massachusetts — RE18RC07: Property Assessments, Valuation and Taxation: https://www.mass.gov/info-details/re18rc07-property-assessments-valuation-and-taxation
– International Association of Assessing Officers (IAAO): https://www.iaao.org/
Educational disclaimer
This explainer is for educational purposes only and not personalized tax or investment advice. Rules, rates, and procedures for assessments and property taxes vary by jurisdiction; consult your local tax authority or a qualified professional for guidance specific to your situation.