Property Taxes Explained: How Assessments Work and How to Appeal Yours

Property taxes are one of the biggest ongoing costs of owning a home, and they vary enormously from one state and county to the next. Many homeowners pay their bill through escrow without ever checking whether the assessment behind it is accurate. Errors happen, and appeals can succeed.

How your bill is calculated

The basic formula is simple: taxable value × tax rate = tax bill. The details vary:

• Market value: the assessor's estimate of what your home would sell for.
• Assessed value: some jurisdictions assess at 100% of market value, others at a fixed percentage (the assessment ratio).
• Exemptions: amounts subtracted from your assessed value, such as a homestead exemption.
• Tax rate: often expressed as a millage rate. One mill equals $1 of tax per $1,000 of taxable value. Your total rate combines levies from the county, city, school district and special districts.

Limits and caps vary by state

Some states cap how quickly assessments or taxes can rise. California's Proposition 13, for example, generally limits annual increases in assessed value to 2% until the property is sold. Other states have homestead caps on annual increases for primary residences. Check your state's rules to understand what to expect after you buy.

Don't miss the exemptions

Many homeowners leave money on the table by not applying for exemptions. Common ones include:

• Homestead exemptions for primary residences.
• Senior citizen exemptions or assessment freezes.
• Disabled veteran exemptions, which can be substantial.
• Disability exemptions.

Exemptions usually aren't automatic. You typically apply once with your county assessor, sometimes by a specific deadline after buying.

How to tell if your assessment is too high

1. Check the property record card. Verify the square footage, bedroom and bathroom count, lot size and features. Errors such as a phantom finished basement or an extra bathroom are common and easy to fix.
2. Compare with recent sales. Look at homes similar to yours that sold around the assessment date.
3. Compare with neighbors' assessments. Similar homes should be assessed similarly. Assessment records are usually public.

Filing an appeal

The process differs by county, but it generally works like this:

• Watch the deadline. Appeal windows can be short, sometimes 30 to 60 days after assessment notices are mailed.
• Start informally. Many assessor's offices will correct factual errors or review comps without a formal hearing.
• Prepare evidence. Bring recent comparable sales, photos of condition problems, contractor repair estimates or a recent appraisal.
• Go to the board. If the informal review doesn't resolve it, present your case to the local board of review or equalization. Stick to evidence about value, not complaints about the tax rate.

The bottom line

Review your assessment notice every year, apply for every exemption you qualify for and appeal when the evidence supports it. A small reduction in assessed value lowers your taxes every year it stays in place.