Are Property Taxes Based on Appraised Value?

Property taxes fund local government services like schools, police, fire departments, roads, and libraries. Understanding the relationship between a property’s value and its tax bill is important. Property taxes are based on a property’s appraised value, which undergoes adjustments before taxes are calculated.

Determining Property Appraised Value

A property’s appraised value is established by a local assessor’s office or appraisal district. These entities determine the fair market value, which is what a buyer would reasonably pay in the current market. This valuation involves examining property characteristics and market conditions.

Appraisers use three main approaches to determine a property’s value. The sales comparison approach involves comparing the property to similar properties recently sold in the area. Adjustments are made for differences in features, size, condition, and location. This method is widely used for residential properties due to available sales data.

Another method is the cost approach, which estimates a property’s value by calculating the current cost to replace or reproduce its structures, less any depreciation, and then adding the land value. This approach is particularly useful for newer constructions or unique properties where sales comparisons are scarce. The income approach, primarily used for income-generating properties like rental homes or commercial buildings, values a property based on its potential to generate revenue. This involves analyzing the property’s potential income, expenses, and a capitalization rate to estimate its market value.

Several factors are considered during an appraisal. These include the property’s location, such as proximity to schools and amenities, and its physical characteristics like size, age, and condition. Appraisers also examine recent sales of comparable properties, the local real estate market, and any unique features or improvements. The goal is to provide an unbiased assessment of the property’s worth.

From Appraised Value to Tax Bill

The appraised value determined by the local assessor is the starting point for property tax calculations, but it is not the exact figure used for taxation. Local governments use an “assessed value,” which is a percentage of the appraised value. This assessed value is the amount on which the property tax bill is directly based.

Tax rates, often expressed as millage rates, are then applied to this assessed value. A millage rate represents the amount of tax per every $1,000 of a property’s assessed value. For example, a millage rate of 10 mills means a property owner pays $10 for every $1,000 of assessed value. Various local taxing authorities, such as school districts, municipalities, and counties, set their own millage rates to fund their specific services.

Exemptions and deductions can reduce a property’s taxable value. Homestead exemptions, for example, reduce the assessed value for owner-occupied primary residences. Other exemptions may exist for senior citizens, veterans, or individuals with disabilities, depending on local regulations. These exemptions are subtracted from the assessed value to arrive at the taxable value.

The basic formula for calculating property tax involves multiplying the taxable value by the total tax rate. This can be expressed as: (Assessed Value – Exemptions) x Tax Rate = Property Tax. For example, if a property has an assessed value of $200,000, qualifies for a $20,000 exemption, resulting in a taxable value of $180,000, and the combined tax rate is 0.015 (or 15 mills), the property tax would be $180,000 x 0.015 = $2,700.

The Appraisal Review Process

Property owners who believe their property’s appraised value is incorrect can seek a review. The process begins with an informal review with the local assessor’s office. This step allows property owners to discuss the assessment with an appraiser and address errors in the property record, such as incorrect measurements or features. Submitting documentation supporting a different value during this stage can resolve disputes.

If an informal review does not lead to a satisfactory resolution, a formal appeal process is usually available. This generally involves filing a written petition or protest with a local board, often known as a Board of Equalization or Tax Appeal Board. There are specific deadlines for filing these appeals, which can range from 30 to 60 days after receiving the assessment notice or tax bill.

To support an appeal, property owners should gather compelling evidence. This evidence can include recent sales of comparable properties in the neighborhood that sold for less than the subject property’s assessed value. Other useful documentation includes a professional appraisal of the property, photos showing the property’s condition or any damage, and blueprints or surveys if there are discrepancies in property descriptions. The goal is to demonstrate that the assessed value does not accurately reflect the property’s fair market value.