Assessed value is the value that the local government calculates for a property in order to establish the taxes that the owner must pay on the property. Assessed property values are by nature much more static than fair market value. Whereas the fair market value of a home can increase as soon as improvements are made to the property, assessed property value can only increase when an official conducts a reassessment.
Reasons For Increase
When property value is reassessed, several key factors can cause the value to be increased. Physical improvements to the property are the most obvious: improving the exterior condition of the house, landscaping and any additions to the house can increase the assessed value immediately. Beyond the attributes of the property itself is the value of the property's location. Improvements in neighborhoods, known as "gentrification," can also increase the assessed value.
Routine reassessment of property values is the most common way in which assessed value can increase. These reassessments allow local governments to collect taxes equitably. However, because of the cost associated with reassessing, assessed values cannot keep up with the day-to-day fluctuations of the real estate market. Most states regulate the period between reassessments, in the same way that the federal government mandates the period of time between Censuses. Most states mandate that reassessments be made every five years.
Exceptions to the Rule
There are, however, some notable exceptions to the common five-year rule. Eight states mandate that reassessments be made annually. Two states allow 10 years in between reassessments. New Jersey mandates reassessments only when improvements have been made to the property. California mandates reassessments when either improvements are made or a property is sold. Seven states have absolutely no provisions for reassessments. Your state and county's regulations regarding the occasions for reassessment determine the frequency with which your property's assessed value can increase.
Assessed Value Vs. Taxation Rates
Even though assessed property value can only increase upon an official reassessment, property tax rates can increase annually, though the percentage by which they can increase is usually regulated. Governments generally calculate the tax rate by considering the total value of all properties within its borders and determining the rate at which they must be taxed in order to collect enough money to fund local infrastructure and services. If the government determines that the tax rate must increase to adequately support the county, they can increase the tax percentage on the existing assessed value.
Read More: Assessed Property Value Vs. Total Land Value
- Zillow: Assessed Values vs Appraised Values
- City & County of San Francisco Office of Assessor-Recorder: Assessment Information
- Tax Foundation: State Provisions for Property Reassessment
- Canyon County: Citizen's Guide to Property Assessment
- Tax Foundation. "State Provisions for Property Reassessment." Accessed Jan. 29, 2020.
M. Farrugia is a writer and editor with more than five years experience in print and online media. She holds a Bachelor of Arts in French and Francophone studies from UCLA, and a Master of Fine Arts in creative writing/critical studies from CALARTS. Her writing appears regularly on Racked and Curbed.