A Simplistic Guide to Property Tax Assessments

What are property tax assessments?

With property taxes being an important source of revenue for local governments, the process of tax assessment itself is the act of calculating the value, and determining the use of the property for taxing purposes. This act is usually completed by tax assessor offices and are typically localized at the county level.

The money allocated from property taxes pay for things like public schools, local infrastructure, libraries, government employees' salaries, parks and recreation, sanitation, and similar government departments. Certain property tax bills detail specifics on exactly how much of your money goes into certain government and public expenses.

Property taxes are a completely separate amount from mortgage payments, causing homeowners to often be blindsided by assessments and ill-prepared to pay them.

If you understand what goes into these assessments and get an idea of what is likely to drive that amount up, you are more likely to budget accordingly and avoid the surprises ahead.

How are property taxes calculated?

Three main factors go into your property tax bill: the assessed value of your property, your property tax rate, and any exemptions that you qualify for. The assessed value of your property and the process of assessment can differ based on jurisdiction. Typically, the value of a property is assessed on a specific date annually but in other cases, it is done every other year.

An assessment is based on the assessor’s estimation of the market value of your property. Sometimes this estimation is multiplied by a specific assessment rate which goes into your property assessment. Regardless, value is usually determined by a sales comparison, the cost method, or the income method.

Sales comparison

An assessor looks at similar or comparable properties to yours that have sold in your area and compares them to yours. After adjusting based on variables like features, renovations and damages, a value is calculated.

The cost method

An assessor determines the cost of completely reproducing your home with respect to labor and materials. This factors in depreciation if your property is past a certain age threshold, and then adds up the actual amount of land included within your property boundaries to calculate a value.

The income method

An assessor determines how much income you would get if the property was rented out based on factors including insurance, rental rates and maintenance. This system is used mainly for commercial properties.

What else affects your property tax bill?

Your property tax assessment is also affected by what you are using your property for. So, different usage for your property (agricultural, residential, commercial, office, etc.) will incur different amounts that influence the total amount you pay on your tax bill.

How can I lower my property taxes?

There are a few different approaches to lowering property taxes, with some tactics being more thorough than others. Requesting your property tax card from a local assessor’s office is a great starting place, as this allows you to review lot size, room dimensions, and the details of fixtures in the home. Reviewing this card will allow you to spot any mistakes or inaccuracies and contest such things with your assessor. This is an incredibly common cause of inflated assessments.

If you find yourself in the middle of property improvements or recently completed such renovations like adding a pool, deck, or similar fixture, your property value will surely go up and so will your assessment. You can be proactive about this and call your building or tax assessment offices ahead of time to ballpark what these improvements might look like.

Another method to lowering your property taxes is to actually walkthrough the assessment process with your assessor. Most people let their assessor walk unsupervised and allow them to interpret property features as they see them. They might miss things like updated appliances, smaller renovations, and subtle deficiencies that all influence your final assessment.