Guide to assessed home value

Quick insights

• Assessed value is used by local governments to calculate your property taxes, not to determine your home’s market worth.
• The figure is typically based on your home’s size, location and condition, along with local assessment rates.
• Your assessed value may differ from your home’s appraised or market value; understanding the differences among these values can be helpful.

When it comes to property taxes, your assessed home value plays a significant role. It’s one of the main factors local governments use to calculate how much you owe each year. While assessed value is not the same as your home’s market or appraised value, the amount can help when budgeting and reviewing your annual tax bills.

What is the assessed value of a home?

The assessed value of a home is the dollar amount assigned to your property by a local tax assessor. The assessment is not based on what someone would pay for your home today, but rather on a standardized valuation method used by your local government. The main purpose of the assessed value is to fairly distribute the property tax among homeowners in your area. It ensures each property owner pays a proportionate share based on the relative value of their home.

Why is assessed value important?

The assessed value directly impacts how much you pay in property taxes. A higher assessed value generally results in a higher tax bill. This value is also important when reviewing your annual tax notice or challenging your property tax assessment if you believe your home has been overvalued. Understanding this value helps you estimate long-term homeownership costs and play your budget more accurately.

How assessed value is calculated

Assessed value is typically calculated as a percentage of your home’s fair market value—the price your property would likely sell for in a competitive market. This percentage is known as the assessment ratio, and it varies by location.

Factors considered in a tax assessment

• Home size and condition: Larger or recently renovated homes generally results in a higher tax bill.
• Location: Homes in desirable or high-demand areas may be assessed at a higher value.
• Lot size: A bigger lot can increase the property value.
• Improvements: Additions like a finished basement, new garage or upgraded kitchen can increase your home’s value in the eyes of the assessor.

Assessed value and property taxes

While the assessed value helps calculate property taxes, it is not the same thing as the tax amount you owe. Property taxes are determined using this formula:

Fair Market Value × Assessment Rate × Millage Rate = Property Tax Owed

• Fair market value: The estimated price at which the property would sell on the open market.
• Assessment rate: The percentage of the fair market value that is used to determine the assessed value for tax purposes. This rate is set by the local tax authority.
• Millage rate: The tax rate expressed in mills, where one mill equals one-tenth of a cent. This rate is used to calculate the amount of tax owed per dollar of assessed value.

Example: If your home has a fair market value of $300,000, your local assessment rate is 80%, and your mileage rate is 20 mills (or $20 per $1,000 of assessed value), the calculation would be:

$300,000 x 0.80 = $240,000 (assessed value)

($240,000 / 1,000) x 20 = $4,800 annual property tax

What is a special assessment tax?

A special assessment tax is a fee charged by your local government to fund specific improvements that benefit your neighborhood or property directly. Unlike standard property taxes, which fund general public services, special assessments cover targeted projects. These could include sidewalk repairs, street repaving, new sewer lines, street lighting and more.

You'll usually only pay a special assessment if your home is within the area directly impacted by the improvement. These fees may be billed as a one-time charge or spread out over several years, depending on the size and scope of the project.

Assessed value vs. market value

Assessed value is the value assigned to your home by your local tax assessor for the purpose of calculating property taxes. Market value is the price your home would likely sell for on the open market, based on current demand, condition, location and comparable home sales.

• Who determines each: The local government’s tax assessor sets the assessed value, while market value is determined by buyers and sellers in the real estate market, often with input from real estate agents and appraisers.
• Why the difference matters: Assessed value affects your property tax bill, while market value influences how much equity you have in your home and what you could realistically sell it for. Knowing the difference helps you understand your financial position as a homeowner.

Assessed value vs. appraised value

Appraised value is an estimate of your home’s worth provided by a licensed appraiser, usually required during mortgage origination or refinancing.refinance-hl000061 Appraisals are generally based on a physical inspection and comparable sales in the area.

• Who uses each value: Mortgage providers, buyers and sellers rely on appraised value during real estate transactions. Local governments use assessed value to calculate your property taxes.
• Impact on homeowners: Appraised value affects how much you can borrow and the terms of your loan. Assessed value affects your annual tax obligation.

In summary

The assessed value of your home plays a key role in how much you pay in property taxes. This doesn’t reflect what your home would sell for or what it’s worth to a loan provider. Knowing how assessed value works can help homeowners make informed decisions about buying, selling or managing property taxes.