What Is the Assessed Value of a Home?
By, Director of Content Marketing
A home’s assessed value is its current estimated worth as determined by a municipal property assessor. Tax officials use this value to calculate how much you need to pay for property taxes every year.
Procedures for calculating the assessed value of homes may vary by tax district, but generally, this value is calculated based on a specified percentage of either the appraised or market value of the property. Other factors like location and comparable properties may also be considered when estimating a home's assessed value.
Knowing the assessed value of your home can help you understand how your property taxes are calculated, which can be useful in planning your finances and payments.
Understanding Assessed Value
Generally, the main purpose of a home assessment is to determine how much the local government will charge on property taxes. Most states and municipalities use fair market value as the basis, but some depend on the appraised value of the property. Aside from homes, assessments are conducted for any taxable property.
An assessor determines the estimated worth of a property through an assessment. Assessors are local government officials and follow state laws. Property taxes vary per location. The need for a new assessment may also vary from state to state. Some areas may require it annually. Others may have a list of situations when a reassessment is necessary.
For instance, in California, the assessed values of properties are based on the 1975 fair market value plus an annual increase limited to the inflation rate or 2%, whichever is less. A new assessment by a local assessor will only occur if there’s a change in ownership, new construction is completed, new construction is unfinished by the first day of January or the market value drops below the factored value stated in Proposition 13 of the state constitution.
Although often used interchangeably, real estate tax and property tax are technically different. The latter is a broader term.
Real estate taxes only apply to real estate properties or those that are bolted or can’t be moved, such as houses. Property taxes, on the other hand, are applicable to all types of properties, including real estate and personal property, like vehicles. This means all real estate is considered property, but not all properties are real estate.
Your Home’s Assessed Value and Property Taxes
Whether you’re a homeowner or planning to be one, it’s important to understand the various expenses that come with homeownership. Aside from utility bills, mortgages and insurance, a significant chunk of home-related bills may be attributed to real estate taxes.
Local governments require property owners to pay taxes, which cover the costs of public services like schools, police, garbage collection and road maintenance. For homeowners, the taxable value of their real estate property is based on an assessment. The higher the assessed value, the higher the tax will be.
Comparing Home Assessment, Home Appraisal and Market Price
Assessment, appraisal and market price are different ways to measure the value of a home. Home assessments are conducted to determine the tax due for the property. A home appraisal is often done to determine the value of a home and is often a way for lenders to calculate mortgage amounts, payments and terms. It can also be used to calculate home equity or the amount that you own out of the total market value of your home. Market price, on the other hand, refers to the selling price in an open market.
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How to Calculate Your Home’s Assessed Value
Although the criteria, rates and procedures to calculate a home’s assessed value may vary depending on the state, municipality or county, knowing the general formula can help you get an estimated value.
Most states and municipalities use market value when calculating a home’s assessed value. So, for this guide, we’re using that in the formula.
Start by determining the market value of your home. Then, check the assessment rate in your area.
For the purpose of this example, we’ll be using the assessment rate in Connecticut. Let’s say you own a home in Connecticut with a market value of $300,000.
- State: Connecticut
- Assessment Rate: 70%
- Market value: $300,000
The first step is to divide the assessment rate by 100. In this case, the assessment rate is 70%. Dividing it by 100 will result in 0.7.
Then, multiply this by the market value. For our example, multiply $300,000 by 0.7.
Using the formula, we got $210,000. This is the assessed value of a Connecticut home with a market value of $300,000 and the taxable value used to calculate property tax for said home.
Home Assessment Value FAQ
A home assessment is mainly used to calculate property taxes. To help you better understand the concept and how it works, MoneyGeek answers some frequently asked questions.
Expert Insights on Home Assessment
Understanding what the assessed value of your home is and how to find it can help you make informed financial decisions. MoneyGeek asked a few industry experts to share some thoughts and advice.
- Aside from the assessed value of a house, what other factors are considered when evaluating a homeowner’s real estate taxes?
- What resources and/or tools can you share to help homeowners better manage their taxes, especially their real estate taxes?
- Are there tax exemptions based on a home’s assessed value? If so, what are they?
Real Estate Broker, Realtor and Certified Residential Specialist
Owner & CEO of Denver Home Buyer
Homeownership comes with benefits and responsibilities. MoneyGeek provides various online resources you can use to gather relevant information about homeownership.
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About Nathan Paulus
- State of Connecticut Office of Policy and Management. "Mill Rates for FY 2014-2023." Accessed April 3, 2023.