How to Read a Property Tax Assessment (And Why It Matters)

Your property tax assessment is more than just a bill—it's a window into how your local government values your property, what you'll actually pay, and whether you're being charged fairly.

Most homeowners glance at the total and file it away. But understanding the details can save you thousands and reveal important information about the property you're buying or own.

The Key Components

Every property tax assessment contains these critical sections:

1. Assessed Value

This is what the local tax assessor determined your property is worth for tax purposes. Critical: This is not the same as market value.

Many jurisdictions assess properties at a percentage of market value (e.g., 80% or 90%). Check your local assessment ratio.

2. Tax Rate (Millage Rate)

This is the rate applied to your assessed value. It's usually expressed in mills (1 mill = $1 per $1,000 of assessed value) or as a percentage.

3. Exemptions

These reduce your taxable value. Common exemptions:

• Homestead exemption: $25,000-$50,000+ reduction (varies by state)
• Senior citizen exemption: Additional reduction for 65+
• Disability exemption: For qualifying disabilities
• Veterans exemption: For qualifying veterans

4. Assessment History

Shows how the assessed value has changed over time. This reveals:

• Whether your property value is increasing faster or slower than the market
• If recent renovations triggered a reassessment
• Whether you should challenge an unfair increase

What Your Assessment Reveals

Is the Property Overpriced?

If the listing price is dramatically higher than the assessed value (adjusted for assessment ratio), ask why:

• Has the market appreciated significantly since the last assessment?
• Were major improvements made that aren't yet reflected?
• Or is the seller just overpricing?

Hidden Costs

Property taxes are often a buyer's second-largest monthly expense after the mortgage. Always check:

• Current annual tax: What does the current owner pay?
• Your future tax: Will it jump after you buy? (Some states cap increases for existing owners but reassess on sale)
• Upcoming reassessments: Is your town about to do a citywide reassessment?

Land vs. Building Value

The breakdown between land and building value matters:

• High land value, low building value: Good lot, but the house may need work or replacement
• Low land value, high building value: Great house, but location may be limiting future appreciation

When to Challenge Your Assessment

You should consider appealing your assessment if:

• Your assessed value increased significantly while neighbors' didn't
• Comparable homes are assessed lower (do research on similar properties)
• Your home has damage or issues not reflected in the assessment
• The assessment doesn't match reality (e.g., says 4 bedrooms, you have 3)

Most jurisdictions have a formal appeal process. You'll need:

• Evidence: Recent appraisal, comparable sales, photos of issues
• Documentation: Assessment records of similar properties
• Deadline: Appeals usually must be filed within 30-90 days of receiving your assessment

Common Mistakes

1. Assuming Assessed Value = Market Value

It doesn't. Assessed value is for tax purposes and often lags the market by 1-3 years. Always apply the local assessment ratio.

2. Ignoring Exemptions

Many homeowners don't claim exemptions they qualify for. File for your homestead exemption immediately after buying. Check for senior, veteran, or other exemptions annually.

3. Not Checking After Purchase

In some states, properties are automatically reassessed at sale price. Your taxes might jump 20-50% after closing. Budget for this.

Pro Tips

• Look up property taxes before making an offer: Most county assessor websites are public
• Factor taxes into affordability: Include taxes in your monthly payment calculation
• Check for special assessments: Look for upcoming sewer, road, or infrastructure projects that could add costs
• Review assessment notices annually: Challenge errors immediately

Key Takeaways

• Assessed value ≠ market value; apply your local assessment ratio
• Tax rate × assessed value = annual tax (minus exemptions)
• Always claim homestead and other exemptions you qualify for
• Property taxes can increase significantly after purchase in some states
• Challenge assessments if you have evidence they're unfair
• Factor property taxes into your affordability calculation

Related Reading

• Hidden Costs of Homeownership: Beyond Your Mortgage Payment
• The Math Behind Home Affordability
• The First-Time Homebuyer's Complete Guide