What Is a Property Tax Assessment?

Property tax assessments help determine a property’s value for tax purposes. If you believe your assessment was incorrect, you can request an appeal through your local government.

Many homeowners have witnessed considerable increases in property value over the past few years. According to the S&P CoreLogic Case-Shiller U.S. National Home Price Index, home prices increased by 18.9% in 2021. Along with the meteoric increases in home prices, property tax bills have shot through the roof, with an average increase of 18%, according to a report from home service provider research company House Method.

But according to the National Taxpayers Union Foundation, just 5% of assessed taxpayers ever initiate an appeal.

“Even though the pace of home price growth is slowing, home values continue to climb by double digits this summer. This means that property assessments and the taxes that stem from them are also likely to move higher for many homeowners,” says Danielle Hale, chief economist for Realtor.com.

“For recent homebuyers taking on a mortgage, property taxes generally make up a smaller share of their monthly payment, but for homeowners who have owned their home for a while and have paid down or even paid off their mortgage, property taxes are a more sizable chunk of their housing costs, and whittling this bill down can be a big help to the monthly budget,” Hale adds.

If your tax bill has gone up, appealing your assessment could help lower your tax liability. However, homeowners will first need to prove that the assessed value of their property was incorrect.

What is a property tax assessment?
How property taxes are calculated.
What if you disagree with your property tax assessment?
How to appeal your property tax assessment.
What Is a Property Tax Assessment?
Property taxes are the principal source of income for most local governments, but they remain a financial burden for homeowners even after their mortgages have been paid in full.

Property tax assessments determine the property value, which is performed by a government assessor who then uses this assessment to calculate the amount of taxes due. While the taxes are paid in regular intervals depending on the county and state, they’re typically paid annually.

Here’s what influences your tax assessment and bill:

* Appraised Value. Your home’s value, also known as the fair market value, is determined by a qualified inspector’s subjective assessment of its physical characteristics and market comparisons to other properties like it.

*Assessed value. Your property’s assessed value (used for tax reasons) may vary from its appraised value. Changes in ownership or significant renovations or additions to a house are two examples of occurrences that might prompt a property valuation.

*Taxable value. Tax due is determined by deducting exemptions from the assessed value and then multiplying the resulting amount by the millage rate in the area.

Lenders often estimate their clients’ annual property tax bills and add them to their mortgage payments in advance. An escrow account is used to facilitate budgeting, which is why some homeowners may not have had to pay it separately.

How Property Taxes Are Calculated
The value of your property has the greatest impact on the calculation of your property taxes, relative to the other variables. Some municipalities assess yearly while others assess every three years or when the property is scheduled. In certain jurisdictions, the assessed value is determined by multiplying the market value by an assessment rate.

Tax assessors calculate your tax rate using the mill levy, or millage rate, with one mill equaling one-thousandth of a dollar. This amounts to $1 of tax for each $1,000 of assessment. The taxable value of your property is then multiplied by the number of mills levied.

There are also exemptions you may be eligible for, such as the homestead exemption, which can help homeowners minimize their property taxes. Keep in mind that while a drop in assessed value doesn’t always reflect a drop in market value, it may assist in reducing your tax payment.

What if You Disagree With Your Property Tax Assessment?
As a homeowner, you have the right to contest your property’s tax assessment and obtain a formal reassessment. Though there is a right to appeal the assessment, each county and state has its own unique procedure for doing so. Get in touch with your local tax authority for the exact information on how to apply for a reassessment, tax exemptions or a freeze on your property taxes.

“While assessment laws, rules and appeal dates differ in each state, one of the general duties of assessment professionals throughout our region is to estimate the market value of residential properties, specifically how much that property would sell for under normal conditions,” says Dixie Saunders, president elect and secretary of the North Central Regional Association of Assessing Officers, and the county assessor for Van Buren County, Iowa. “Each state has an appeal process in place for when a property owner believes their respective assessment, or appraisal, does not reflect market value.”

How to Appeal Your Property Tax Assessment
Despite how powerless you may feel when it comes to other types of taxation, you have the right to dispute the assessment of your property taxes. While the specific process may vary by county and state, the overall process is likely to be similar.

Here are general steps on how to appeal your property tax assessment:

*Know the rules. Assessments are often distributed within the first several months of the year, so familiarity with the government’s timing is just as vital as understanding the entire process. As soon as you receive the evaluation, verify the value challenge deadline as you may only have a few weeks.

*Tax deductions. Itemize your tax assessment so you can examine your tax rate, assessment data, payment schedules as well as any possible reductions. You may even be able to claim a lower tax rate or a credit based on your income or your status as a senior citizen, military veteran or disability depending on the laws of your state. Other possible tax benefits may come in the shape of freezes or deferrals if you are a specific age and have lived in your home for a certain number of years.

*Corrections. Verify the information on your property’s record card which you may be able to find on your municipality’s website or at the assessor’s office. Request it through email or fax, and make sure there aren’t any errors in your property description. You may be able to avoid filing a formal appeal by doing this first.

*Comparables. Use a site like Zillow or Realtor.com to look for comparable homes in your neighborhood. It will help you determine whether their evaluations are in line with your own and if you have a legitimate case.

*Evidence. Before you make your official appeal, collect all your evidence and build your case. Evidence might include the presentation of comparable properties and sales prices indicating that your home is worth less than projected. Other evidence might be a leaking basement or poor soil grading. Essentially, this is everything that could diminish your market value and drive away potential buyers.

*Fight. The time it takes will vary based on the complexity of the appeal and the pace at which it is reviewed in your locality. If your appeal is refused and you believe it was not for justifiable reasons, you may take it to the appeals board.

*Professional appraiser. An expert can always be hired to advocate on your behalf. Check with the Appraisal Institute or the American Society of Appraisers to find a certified appraiser who can give the most convincing evidence of the property’s value.

*Celebrate. If everything is done and approved, celebrate.