Assessed Value

What Is an Assessed Value?

An assessed value is the dollar figure a tax assessor, usually a local government official, assigns to a piece of taxable property. Most often this refers to real estate such as a house, apartment building, or plot of land, but it can also apply to vehicles, equipment, and other personal property. The assessed value is the starting point for calculating the property tax owed on that asset. The owner does not choose this figure, and it is not always the same as what the property would sell for.

How Assessed Value Is Determined

Assessors estimate worth using methods such as comparing recent sales of similar properties, estimating the cost to rebuild, or evaluating the income a property produces. The goal is to approximate market value, the price a willing buyer and seller would agree on. In many places, however, the assessed value is not the full market value. Some jurisdictions apply an assessment ratio, a fixed percentage that converts market value into the figure used for tax purposes. Assessors typically review values on a regular cycle, and values can also change when a property is improved, subdivided, or sold.

The assessed value, reduced by any exemptions, is then multiplied by a tax rate to produce the bill. Local tax rates are often expressed as a mill rate, meaning dollars of tax per thousand dollars of assessed value. The basic relationship looks like this:

Property tax = (assessed value minus exemptions) × tax rate

Why It Matters to Investors

For real estate investors, assessed value affects the ongoing cost of holding a property, since property taxes are a recurring expense that can reduce net income. A rising assessment can increase the tax bill even when the owner has not sold or made changes. Investors should also understand that the assessed value and the appraisal a lender uses are separate estimates, and they can differ.

Owners who believe an assessment is too high can usually file an appeal with the local assessment office. These appeals typically follow formal procedures and deadlines set by the local jurisdiction. Because assessed value is a government estimate rather than a market price, it is worth reviewing it alongside recent sales and the actual tax bill when evaluating a property's costs.