Why Did My Property Taxes Go Down but Not My Tax Bill?

A lower property tax assessment might seem like it should reduce your tax bill, but that’s not always the case. Many homeowners are surprised to find their tax payment remains the same or even increases despite a drop in their assessed home value. This happens because multiple factors determine your final bill beyond just the property valuation.

Recalculated Property Value

Local governments reassess property values to reflect market changes, renovations, or depreciation. These reassessments occur on scheduled cycles, after recent home sales, or through homeowner appeals. Even if your home’s assessed value drops, how it’s recalculated can affect your tax bill in unexpected ways.

Assessment methods vary, but most jurisdictions use one of three approaches: market value, cost, or income. The market value approach bases assessments on recent sales of similar properties, meaning if home prices in your area decline, your assessed value might follow. The cost approach estimates the expense of rebuilding the property, factoring in depreciation. The income approach, used primarily for rental properties, considers potential earnings.

Some jurisdictions impose caps or phase-in adjustments, limiting how much a home’s taxable value can decrease. For example, California’s Proposition 13 restricts annual taxable value increases to 2% unless there’s a sale or new construction. If your home’s assessed value was already below market due to these limits, a further decline may not lower your tax bill.

Revised Local Tax Rates

Even if your home’s assessed value drops, local governments adjust tax rates to meet budget needs and voter-approved measures. When many properties see valuation decreases, municipalities often raise tax rates to maintain funding for schools, emergency services, and infrastructure.

Many areas use a revenue-neutral approach, meaning if total property values decline, tax rates increase to ensure the government collects the same revenue. For example, if a city’s total assessed property value declines by 5%, officials may raise the millage rate to compensate. This means your tax bill may not decrease, even if your home’s value does.

Voter-approved bond measures and levies also influence tax rates. If residents approve new funding for schools or public projects, tax rates can rise regardless of property value trends. Some jurisdictions have statutory limits on rate increases, but others allow flexibility, especially during budget shortfalls.

Adjustments from Exemptions

Tax exemptions and abatements can significantly impact a homeowner’s final bill. Many jurisdictions offer exemptions for primary residences, seniors, veterans, and individuals with disabilities. These exemptions typically reduce the taxable portion of a property’s value rather than the tax rate itself.

Some exemptions phase out as property values decline. For example, a homestead exemption might provide a flat $50,000 reduction in taxable value. If a home was assessed at $300,000 and dropped to $275,000, the exemption remains the same. However, if an exemption is calculated as a percentage of assessed value, a lower valuation could reduce the exemption amount, leading to a smaller tax break.

Local governments periodically revise exemption policies, adjusting eligibility criteria, income limits, or application deadlines. If a homeowner no longer qualifies due to changes in income or residency, their tax liability may increase despite a lower assessed value. Some exemptions require annual requalification, meaning a missed filing could result in losing the benefit entirely.

Market-Driven Reductions

Broader economic shifts can affect property taxes in unexpected ways. If residential values decline but commercial or industrial properties see steeper drops, municipalities may redistribute the tax burden, increasing what homeowners owe.

Debt obligations and pension liabilities also play a role. Many local governments rely on property taxes to fund municipal bonds, employee pensions, and operational costs. If revenue shortfalls emerge due to declining property values, officials may adjust tax structures or introduce new levies to compensate. In cities with underfunded pension systems, even a falling home value won’t necessarily lead to a lower tax bill if contributions to retirement funds remain a priority.