What’s a Property Tax Assessment?

Compare your tax assessment to nearly identical properties to see if it's fair. If not, consider if an appeal is worthwhile.
Hal M. Bundrick, CFP®
By Hal M. Bundrick, CFP® 
Edited by Amanda Derengowski
How to Size Up Your Property Tax Assessment

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The cost of homeownership includes a property tax assessment. A few states and most local jurisdictions collect a tax based on the value of private property.

It’s no small-ticket item: Property taxes accounted for nearly one-third of all state and local tax revenue in 2016, the most recent data available, according to the Tax Foundation, a nonprofit think tank.

Here’s how your property tax assessment is determined, and what to do if you think you’re paying too much.

How a property tax assessment is calculated

Your home’s value might be determined for tax purposes by the most recent purchase price, or by a blanket assessment of a neighborhood’s estimated property values. That value is then multiplied by a percentage, often called a millage, to calculate your taxes owed. Depending on the state, property values may be revisited every year, or much less frequently.

“In some states, in theory, they haven't revalued since 1967. They take that value and somehow extrapolate it forward for inflation or this, that and the other,” says John A. Cocklereece Jr., an attorney for Bell Davis & Pitt in Winston-Salem, North Carolina.

When tax assessments aren’t adjusted frequently, “values can get way out of hand a lot quicker and stay that way a lot longer," he adds. Admittedly, that can work for you — or against you.

It may take a trip to your tax assessor’s office to compare your home’s assessed tax value with nearly identical properties nearby to see if your home is valued fairly.

What to do when your tax assessment is wrong

As property values rise over time, assessments and tax bills can swell. To prevent this annual pain in the pocketbook from getting out of control, know when to appeal your tax assessment, because even jurisdictions that reappraise values often can get it wrong.

“That absolutely can happen,” says Debra Bawcom, senior property tax consultant at Texas Protax in Austin. Your property might be incorrectly valued if a jurisdiction has documented the wrong number of bedrooms, bathrooms or square footage in your house, she adds.

If home values are increasing where you live, property tax assessments should be rolled back.
Debra Bawcom, Senior property tax consultant

If you think there’s an error in your assessment, the first step is to call your local tax assessor and explain your concerns. If this conversation convinces you that an appeal is worthwhile, ask what the process is.

Many jurisdictions limit the hearing of appeals to a period following the issuance of new tax notices.

Information you may need to gather in your effort to win an appeal can include:

  • An independent appraisal of your home and property.

  • Original construction plans.

  • Comparable recent sale prices on nearby homes similar to yours.

If home values are increasing where you live, property tax assessments should be rolled back, Bawcom says. If not, you’re being hit with an automatic tax bill increase. An individual appeal may help, but you’ll need to rally community support for a millage-rate decrease.

You may be eligible for a property tax freeze

In some states, senior homeowners or residents with low to moderate incomes may be eligible for property tax freezes, capping the property tax or future rate increases. And most tax authorities grant a “homestead exemption” — a tax discount if the property is your primary residence.

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