Why can’t I just trust the tax assessor to make things right?

Tax assessors are appointed politically and given an impossible job. They are understaffed and cannot find the time to cover their territory and also determine the property value in their jurisdiction accurately. When is the last time the tax assessor came to your home?

The tax assessor’s job description is to protect the aggregate tax base and he will very rarely go out of his way to give someone a break. His office maintains and stores data on each parcel it assesses. Even when he sees or knows of inequity, he/she will not rock the boat and create more work for himself. He is not Robin Hood!

Isn’t it curious that most people assume their property taxes are fair and accurate? But the fact remains, only you can be sure you are not being overcharged.

What is “assessed value” and how is my tax bill determined?

Assessed value is price placed on land and buildings by a government tax assessor for use in levying property taxes. The assessed value of the property may be different than the appraised value. Appraised value or market value is rarely the same as assessed value.

You don’t need a detailed understanding of the whole process, but grasping a few facts will help. First, it is necessary for the taxing authority to know the amount of money (the budget) the local government will spend for one year. The local government provides income for regulatory and service departments, schools, police and fire departments, road maintenance, library, etc.

The total budget is composed of these salaries and expenses along with bonded indebtedness (principal and interest payments on borrowed money that was voted for). This budget is then divided by the total dollar amount of all the assessed value of real estate in the tax district (provided by the assessor) to determine your tax rate. That tax rate when multiplied by your property value (assessed value determined by the tax assessor) equals your tax bill.

In other words, the amount of taxes you pay is the result of the tax rate multiplied against your assessed value.

Why is my home tax assessment different than the price I could sell my house for?

Your home value is the market value. The definition for market value is the most probable price that a property will sell for in a free market of buyers and sellers, free from constraining pressures or unusual situations. This value is found by obtaining a home appraisal.

The assessing authorities use a fractional formula to determine what percentage of market value your house is worth. Usually they call this figure the sales ratio. This can be called, depending on the jurisdiction, the average ratio, assessment level, director’s ratio, the common level of 100% of true value, RAR (residential assessment ratio) or the equalization rate (which may not always be equivalent to the sales ratio). If the sales ratio is 50% then a house that would sell for a market value of $200,000 would be assessed at $100,000.