Assessed Value is the monetary amount assigned to a property by a municipality for the purpose of determining relevant taxes for the property and its owner. This valuation establishes the property’s tax purpose value by considering inspections and comparable home sales in the area. Once this evaluation is complete, the municipal government sets a value on the home and assesses the property taxes due. The owner then receives a final bill for municipal taxes on the property. Also known as the ad valorem tax, the assessed value is typically lower than the property’s fair market or appraisal value. This value is used exclusively for property tax purposes.
The determination of the Assessed Value is the responsibility of a government assessor, usually assigned by specific taxing districts. Each taxing jurisdiction has its own rules and procedures for determining the assessment value, though the general standards are almost identical. Assessors are expected to perform these valuations annually, which informs the yearly property tax bill. Generally, the assessment value remains unchanged from year to year.
The Assessed Value is derived from a percentage of the fair market value. Various elements are taken into consideration when determining this value, including comparable property values, the condition of the property, house features, total square footage, air-conditioned square footage, and market conditions. Many calculations are based on computer models from official real estate databases, but assessors also perform onsite physical assessments when necessary. Some states have specific requirements for these in-person visits and provide rules for property owner objections. Owners can dispute the assessed value and request a reassessment, resulting in a second evaluation.
In most states, the final assessed value represents a percentage of the property’s fair market value, with this ratio varying significantly across states. For instance, Mississippi has one of the lowest assessed value ratios in the United States at just 10 percent, while Massachusetts, in the typically tax-heavy Northeast and New England regions, has a remarkably high 100 percent assessed value ratio.
Most states use a property tax formula to determine the millage rate, which is the tax rate applied to the assessed value. The formula is: Assessed Value x Millage Rate x Assessment Ratio = Effective Property Tax, commonly expressed per $1,000. A single mill equates to $1 of tax per $1,000. Most states also levy a personal property tax on items such as cars, mobile homes, boats, and motorcycles, based on their assessed value.
