Property Tax Assessment: What Is It And How Does It Work?

Property taxes are levied based on the value of a property, and your local government typically handles them. Not many people enjoy paying their property tax bill, but these taxes fund services like public schools, the fire department and road construction.

Amounts due are calculated by doing a property tax assessment. Understanding how this assessment works can help uncover how much you can expect to pay. It will also make it easier to spot if you’re overcharged for property taxes.

What Is A Property Tax Assessment?

A property tax assessment determines the property value and is usually conducted by a government assessor. The assessor uses the assessed value to calculate the taxes owed on it. The exact amount you owe depends on the property location and how much it’s worth. 

If you’re making a mortgage payment, you’re probably already paying property taxes. Most mortgage lenders like to estimate the annual property taxes and bundle them into your monthly bill. An escrow account is set aside to collect these funds each month and disperse them when the payment is due.

Property tax exemptions are available, but most are reserved for religious organizations or government entities. Some counties may offer exemptions for seniors, veterans or disabled individuals, too. Tax deductions are another good way to save money on your property taxes.

Let’s look at the different factors that go into your property assessment.

Appraised Value

It’s easy to confuse the appraised and assessed value of your home, but they aren’t the same thing. The assessed value is a yearly estimation of what your property is worth, and it’s usually lower than the appraised value.

To find the appraised value, a licensed appraiser will determine how much your home is worth. An appraiser will consider the state of the house and current market conditions to come up with a fair market value.

Tax-Assessed Value

The assessed value determines how much your property is worth for taxable purposes. Sometimes this number will align with the property’s appraisal value, but not always. This can happen because assessors aren’t always able to evaluate every home in a given area, making property assessments infrequent.

Certain events can trigger a reassessment, like a change of ownership or a recent remodel. As a result, it’s important to consult state and local laws before considering how much you might owe in property taxes.

Taxable Value

The taxable value determines a property owner’s tax liability. You can determine the taxable value by taking the assessed value and subtracting any property tax deductions you qualify for. From there, you’ll multiply that number by the local millage rate.

For example, the homestead exemption is a common way to lower the taxable value. The homestead property exemption allows you to deduct a certain amount from the taxable value if the home is your primary residence. Some states may offer exemptions if you’re disabled, a veteran or live on certain types of land.

How Are Property Taxes Calculated?

Property taxes vary by state, and they’re calculated based on the assessed value, any exemptions you qualify for and the property tax rates. The assessment considers the total square footage of your home, the number of bedrooms and bathrooms and any property upgrades.

Enhancements like a deck, patio or additional bedroom can also impact your property assessment. If other homes in your neighborhood have risen in value, this can also affect your assessment.

Property Taxes And Escrow

Most homeowners have an escrow account with funds set aside to pay their taxes and homeowners insurance. This account allows you to spread your tax and insurance payments out over the year rather than make one large payment annually.

However, if your property taxes increase, it can cause a shortage in your escrow account. If this happens, you’ll need to make up the difference. You can do this as a one-time, lump sum payment or by increasing your monthly mortgage payment.

Challenging Your Property Tax Assessment

If you feel you’ve been unfairly assessed, you can appeal a property tax assessment and request a reassessment. The process to complete this will vary depending on your county or state.

If you disagree with an assessment, you’ll start by contacting your local tax authority. From there, you can learn how to apply for a reassessment or put a freeze on your property taxes. Make sure you know the deadline for filing an appeal since you may only have a short window of time.

The Bottom Line

During a property tax assessment, a government assessor determines your property’s value. Your property taxes can go up or down, depending on the assessment results. For example, recent home improvements can increase your property’s value.

If you disagree with the result of your assessment, you may be wondering, “Should I appeal my property tax assessment?” You always have the right to request a reassessment as long as you meet your county’s deadline.