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What Is Tax Assessed Value And What Does It Mean For Your Property Taxes?

Scott Steinberg3-Minute Read
January 14, 2022

The tax assessed value of your home often varies significantly from its appraised or actual market value. At the same time, it’s also an important figure to keep in mind, as your house’s assessed value (as determined by a qualified tax assessor) will determine how much that you can expect to pay in annual property taxes.

That said, don’t be surprised if the property tax assessed value of your house is less than the home’s actual market value. Let’s take a closer look at how to define the tax assessed value of your home, how it comes into play in real estate, and how it may affect your household budget.

What Exactly Is Assessed Value?

All homeowners in America are responsible for paying property taxes on their real estate holdings. These annual fees go towards the upkeep of public services and government works. The amount of tax that you can expect to pay each year is directly related to the tax assessed value of your home, as determined by an official tax assessor.

In effect, the assessed value of a house can be defined as the value or dollar amount by which the city or county determines how much you’ll pay in annual property tax. The assessment looks at the condition of the home, the value of similar properties, and any visible updates. Most states reassess property values every few years. Keep in mind:

  • The assessed value of your home is typically different from the market value of your home.
  • The tax assessed value of your house can change every year based on current tax rates for your state/county.
  • This figure is not based on home improvements or features.

How Tax Assessed Value Differs From Market Value

The assessed value of your home is a property's determined valuation the government uses to calculate appropriate tax rates. An assessment will consider several factors such as sales of similar homes and home inspection findings as it goes about making its final determinations. When it comes to selling a home, the assessed value is the most widely accepted dollar value of your home.

However, assessed value and market value can be different for every type of property. This is because the market value of your house takes into consideration factors like:

  • The features of the property
  • Any upgrades made to the home
  • The average price of comparable homes in your area
  • Perceived value of the location

Tax assessed values essentially look at the condition and size of the property and the sale price of similar homes in the area. Note that this value may be lower than the market value of a home, or it can be higher depending on your local market conditions.

Mind you, tax assessed values are largely utilized by the government, though your mortgage lender may use it to estimate how much you’re required to put away each year in escrow. An appraised value is the most frequently used value if a property is being bought or refinanced.

Frequency Of Assessments Vary By Location

Government tax assessors need to review property values on a regular basis to ensure that the assessed tax rates for various real estate holdings are fair. Bearing this in mind, assessors will reexamine homeowners’ property values every few years on average. As a result, homeowners in different locales may find themselves having to pay more property taxes in one year and less the following year, or vice versa.

How To Save On Property Taxes

Property taxes often increase year-over-year, putting an added squeeze on your monthly budget. At the same time, there are also actions that homeowners can actively take to help lower the amount of property taxes that they might expect to pay. These often include:

  • Keeping track of tax assessed values for similar homes in the neighborhood.
  • Choosing home improvement projects wisely.
  • Reviewing tax bills for errors or inaccuracies.
  • Filing appeals with the county if the assessed home value seems overly high.

The Bottom Line

The tax assessed value of your property (used by the government to determine how much you’ll owe in property taxes each year) differs from your home’s market value (how much a buyer might be willing to pay for it at the time of sale).

In addition, the amount that you will be required to pay in annual property taxes will change over time. Your county or city will conduct regular assessments of your property’s value to make sure tax rates are updated appropriately.

Under any circumstances, you can expect to pay property taxes as part of the annual costs of homeownership – and budgeting for property taxes is important each year. Curious how they might affect your finances? You may also wish to research different tax deductions that can help you save money year-over-year.

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Scott Steinberg

Hailed as The Master of Innovation by Fortune magazine, and World’s Leading Business Strategist, award-winning professional speaker Scott Steinberg is among today’s best-known trends experts and futurists. He’s the bestselling author of 14 books including Make Change Work for You and FAST >> FORWARD.