What is the difference between a home appraisal and a tax assessment? Who decides how much I pay in taxes, and how do they decide it? Where are my property taxes going? These are all common questions that homeowner’s have regarding their property taxes. While it is tempting to accept the number that you receive as concrete, it is important to know how the powers that be arrived at that estimate and what you can do to help yourself if you do not think it is correct.
First of all, it is crucial to understand the difference between a tax assessment and a home appraisal. A home appraisal is done to determine the monetary value of the home, and is usually used for determining the parameters of a mortgage and collateral. A tax assessment is also based on the market value of a home, but is just used to determine property taxes. Usually, the higher the value of the home, the more the owner will pay in taxes. Tax assessments are performed by breaking down community metrics (sales of other homes in the area, value of surrounding homes) and individual metrics (square footage, renovations, geographic location) to arrive at an assessed value number. This number then goes into a formula to determine your final tax rate.
The second half of the formula to arrive at your tax rate is usually municipal governments. They are involved because some of your property taxes go to them and insure that the community has enough funding for public spending and projects.
If you think that an assessor has gotten the value of your property wrong, you can appeal the estimation. You cannot argue with the property tax rate, only the assessed value, and only if you think the assessor made a significant error. If you would like to appeal your assessment, you have to look into how your municipality handles them so that you can file it correctly and appear when you are supposed to.
Knowing what the calculation is behind your property tax can make you more prepared for changes in that number in the future. The number will fluctuate depending on improvements made to the home that could change its value, or changes in the rate set by the municipality. Being armed with information on why you are paying what you are paying will make it easier to adjust for changes as they come along.