What Is the Assessed Value of a Home?

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.

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.

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.

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.

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.

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.

Homeownership comes with benefits and responsibilities. MoneyGeek provides various online resources you can use to gather relevant information about homeownership.

• Guide to Home Equity Loans: Home equity loans can help in many ways, such as paying for home improvements, credit card debt and college expenses. Learn the pros, cons, requirements and limits to see if it’s a good option for you.
• Hidden Costs of Buying a Home: Learn about the different expenses to expect when purchasing a home.
• Refinancing Your Mortgage: Refinancing your mortgage can help you get better rates, lower payments and shorter terms. However, there are also risks you need to consider. Find out if refinancing is right for you.
• Step-by-Step Guide to Increasing Home Value: Plan your home improvement project with the help of this guide, which details what upgrades are worth it and shares tips on how you can save money while increasing your home’s value.
• Tax Guide for Military and Veterans: Learn about tax benefits for military members and veterans, including state tax exclusions like property tax exemptions.
• Understanding Home Inspections: Home inspections allow you to evaluate the current condition of a property. Find out the different types of home inspections, what they include and how much they typically cost.
• Best Homeowners Insurance Companies: Home insurance provides a financial safety net for homeowners against unexpected expenses. Find out which companies ranked best in MoneyGeek’s analysis and see which is most suitable for your needs.
• Home Value Shifts Over Time: Explore how home value and population relate to one another, as well as historic trends in both topics among US cities.