Your Property Tax Assessment: What Does It Mean?

Know this to plan your budget, avoid surprises, and spot costly errors

Reviewed by Marguerita Cheng
Fact checked by Ryan Eichler

Property taxes are a primary source of revenue for many local governments. They also represent a significant expense for homeowners, year after year. Even after you’ve paid off your mortgage, you’ll still receive a property tax bill. The starting point for that bill is your property tax assessment. If you know how it’s calculated, you can better anticipate your bill, plan your budget accordingly, avoid surprises and spot costly errors.

Key Takeaways

• Your property tax bill is based on the assessed value of your property, any exemptions you qualify for, and the property tax rate.
• Factors such as the size, construction type, age, and location of your property can affect your tax bill.
• The use of your property (residential, agricultural, apartment, office, commercial, vacant land, etc.) also influences what you pay.
• Tax authorities can adjust your bill by changing the assessed value of your property or the tax rate.
• If you disagree with your property tax bill, check with your local tax authority on how to formally request a reassessment.

How are Property Taxes Calculated?

Your property tax bill is determined by three main factors: the assessed value of your property, any exemptions you qualify for, and the property tax rate.

Your property tax assessment is determined on a specific date. In many jurisdictions, the assessed value is updated annually. In some jurisdictions, however, it’s done every three years, only when the property is transferred, or on another schedule. In some areas, the assessed value is the market value; in other areas, the market value is multiplied by an assessment rate to determine the assessed value.

Exemptions may include a reduction in the assessed value of your property if you are an owner-occupant (sometimes called a homestead exemption). This reduction doesn’t reflect the market value of your property but can lower your tax bill.

The property tax rate, or the multiplier or mill rate, is a percentage (expressed in decimal form) that is multiplied by your property’s assessed value to calculate your tax bill.

Property taxes fund local services such as public schools, community colleges, libraries, government salaries, parks, sanitation, police and fire protection, roads, and more. Each service may have its own rate that’s multiplied by the assessed value to determine your portion of the total tax bill. The final bill is the sum of all these individual amounts.

What Affects Your Property Tax Bill?

In addition to your property’s assessed value, your bill depends on how your property is used (residential, agricultural, commercial, etc.). Certain property uses—such as land and buildings used for religious or spiritual purposes—may be exempt from taxes. Different uses may be taxed at different rates, but taxation should be uniform within the same category, meaning the multiplier should be the same for all properties in that group.

Your property’s size, construction type, age, and location can all impact your tax rate. Even if your bill isn’t affected by changes in the market value of your property, it could still rise if the tax rate increases for any of the components funded by property taxes.

If property tax assessments are based on current real estate values in your area, your bill can fluctuate year to year. Tax authorities can raise your bill by increasing the assessed value of your property and/or the tax rate. Conversely, they can lower your bill by decreasing either the assessed value or the rate.

What Is a Homestead Exemption, and How Does It Affect My Property Taxes?

A homestead exemption is a reduction in the assessed value of your property if you live in the home as your primary residence. This can lower your property tax bill but doesn’t reflect your property’s market value. The specific amount of the exemption varies by state or local jurisdiction, so be sure to check with your local tax authority to see if you qualify and how much it could reduce your taxes.

Can I Dispute My Property Tax Assessment if I Think It’s Too High?

You can dispute your property tax assessment if you believe it’s incorrect. The process typically involves contacting your local tax authority and formally requesting a reassessment. You may need to provide evidence that the assessed value of your property is too high, such as recent sales data of comparable properties. Be sure to check the specific process and deadlines in your area.

Can My Property Tax Bill Increase Even if the Market Value of My Property Stays the Same?

Yes, your property tax bill can increase even if the market value of your property stays the same. This can happen if the local tax authorities increase the tax rate (also known as the mill rate) or if there are changes in the services funded by property taxes. Additionally, even if your property’s market value does not change, other factors—such as new developments or increased local government budgets—can influence the overall property tax rate.

The Bottom Line

Property taxes are one of the most important bills to pay. Failure to do so can result in losing your home. If you’re late, you’ll have to pay interest and penalties. Some areas offer assistance to specific groups such as veterans, whose receiving welfare benefits, people with disabilities such as blindness, and aging adults. If your property is severely damaged or destroyed, consult your assessor‘s office to see if you are eligible for tax relief.

Since property tax laws vary locally, the information in this article is meant to give a general overview. Many tax jurisdictions provide websites that explain each section of your property tax bill in detail. If you disagree with your assessment, check with your local tax authority about how to request a reassessment. You may also find tips for lowering your property tax.