Assessed Value

How It Works

Assessed value is determined by county or municipal assessors using mass appraisal methods governed by state statute and professional standards from the International Association of Assessing Officers (IAAO). In many states, assessed value is a statutory fraction of market value, for example, 10% in Louisiana, 19% residential and 32% commercial in Missouri, and 100% (theoretical) in California, though California's Proposition 13 caps annual increases at 2% regardless of market appreciation. Assessment ratios and revaluation schedules vary by state and even by county: some jurisdictions revalue annually (Florida, Wisconsin), others on a 3-5 year cycle (Massachusetts, Michigan), and a few have not conducted comprehensive revaluations in decades. Some states cap annual assessment increases for homesteaded properties, California's Prop 13 at 2% per year, Florida's Save Our Homes at 3%, New York City's Class 1 at 6% annually and 20% over five years, which causes assessed values to diverge significantly from market values for long-tenured owners. Assessment accuracy is measured using the sales ratio (assessed value divided by actual sale price) with IAAO standards requiring median ratios between 0.90 and 1.10 and coefficients of dispersion under 15%. Systematic under- or over-assessment is an equity issue: studies from the University of Chicago Harris School have shown lower-value homes are routinely over-assessed relative to higher-value homes, shifting tax burden onto lower-income owners. Assessed value determines the tax base, which constrains revenue generation and feeds into the CitySpend Fiscal Health Score trend direction weighting.

Related Terms

• Property Tax, A tax levied on real estate (land and buildings) based on assessed value. Property taxes are the single largest revenue source for most U.S. city governments.
• Mill Rate (Millage Rate), The property tax rate expressed as dollars per $1,000 of assessed property value. One mill equals $1 of tax per $1,000 of assessed value.
• Tax Levy, The total amount of property tax revenue a city authorizes to collect in a given year, calculated by applying the mill rate to the total assessed value of all taxable property.