How Your Local Real Estate Taxes Are Calculated
How does your local municipality calculate your real estate taxes? It may not be as complicated as you think.
Here is the break down.
Lets examine the following terms: market value, assessed valuation, tax rate, assessment and assessment ratio.
Most homeowners have trouble understanding these terms when they receive their tax bill.
Market Value - The most probable price that a property should bring in a competitive and open market under conditions to a fair sale, the seller and buyer each acting prudently and knowledgeably.
After a revaluation, all assessments in the municipality must be 100% true market value.
Assessed Valuation-The value established for property tax purposes.
The homeowner receives a statement indicating that, in the judgment of the local tax assessor, the property is worth $400,000.
By law, properties in this municipality are assessed at 75% of market value.
($400,000 x .
75% = $300,000 the assessed value).
Property taxes will based upon this assessed value.
Tax Rate - The tax rate is applied to the assessed value.
In a certain municipality, the tax rate for property taxes is $0.
35 per $100 of assessed value.
A property's assessed value is $300,000.
The tax collected is; $0.
35 x 300,000 = $1,050.
00 Assessment - The amount of taxes due to the municipality.
Assessment Ratio- The ratio of assessed value to market value.
The municipality requires a 40% assessment ratio on all properties to be taxed.
A property with a $10,000 market value is therefore assessed at $4,000 (.
40% x $10,000), and the tax rate is applied to $4,000.
Note that assessed value does NOT equal market value.
What is the basis for my assessment? Good question.
The assessment is an opinion of value.
Licensed professionals use different logical thought processes to determine an opinion of value.
The most common process to determine value for residential properties is the sales approach.
The sales approach uses recently sold and similar style home sales.
This approach can also be considered and utilized for commercial real estate.
For an assessed value to be considered excessive or discriminatory, it must be proven that the assessment does not fairly represent one of the two standards.
True Market Value- After a revaluation, all assessments in the municipality must be 100% of true market value as of October 1 of the previous year.
Common Level Range - To explain the common level range you must consider what happens after a revaluation in your town is completed.
External factors could be inflation, deflation, appreciation, and depreciation, which cause values to increase or decrease at varying rates.
If assessments are not adjusted annually, a deviation from 100% of true market value occurs.
To determine if your property is at true market value or is with in the common level ranges, it will be necessary to consult a professional.
Your best resource is a certified state licensed real estate appraiser.
Here is the break down.
Lets examine the following terms: market value, assessed valuation, tax rate, assessment and assessment ratio.
Most homeowners have trouble understanding these terms when they receive their tax bill.
Market Value - The most probable price that a property should bring in a competitive and open market under conditions to a fair sale, the seller and buyer each acting prudently and knowledgeably.
After a revaluation, all assessments in the municipality must be 100% true market value.
Assessed Valuation-The value established for property tax purposes.
The homeowner receives a statement indicating that, in the judgment of the local tax assessor, the property is worth $400,000.
By law, properties in this municipality are assessed at 75% of market value.
($400,000 x .
75% = $300,000 the assessed value).
Property taxes will based upon this assessed value.
Tax Rate - The tax rate is applied to the assessed value.
In a certain municipality, the tax rate for property taxes is $0.
35 per $100 of assessed value.
A property's assessed value is $300,000.
The tax collected is; $0.
35 x 300,000 = $1,050.
00 Assessment - The amount of taxes due to the municipality.
Assessment Ratio- The ratio of assessed value to market value.
The municipality requires a 40% assessment ratio on all properties to be taxed.
A property with a $10,000 market value is therefore assessed at $4,000 (.
40% x $10,000), and the tax rate is applied to $4,000.
Note that assessed value does NOT equal market value.
What is the basis for my assessment? Good question.
The assessment is an opinion of value.
Licensed professionals use different logical thought processes to determine an opinion of value.
The most common process to determine value for residential properties is the sales approach.
The sales approach uses recently sold and similar style home sales.
This approach can also be considered and utilized for commercial real estate.
For an assessed value to be considered excessive or discriminatory, it must be proven that the assessment does not fairly represent one of the two standards.
True Market Value- After a revaluation, all assessments in the municipality must be 100% of true market value as of October 1 of the previous year.
Common Level Range - To explain the common level range you must consider what happens after a revaluation in your town is completed.
External factors could be inflation, deflation, appreciation, and depreciation, which cause values to increase or decrease at varying rates.
If assessments are not adjusted annually, a deviation from 100% of true market value occurs.
To determine if your property is at true market value or is with in the common level ranges, it will be necessary to consult a professional.
Your best resource is a certified state licensed real estate appraiser.
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