Property tax vs. tax assessment: What’s the difference?

• A tax assessment is the valuation used to establish the taxable value of property. Tax assessors typically conduct assessments on a regular schedule, such as every three to five years.
• Property tax is the tax paid on a property’s value. It’s calculated by applying the rate in effect at the location of the property to the assessed value.
• Most jurisdictions allow taxpayers to appeal a property tax assessment they believe is inaccurate. Appeals must be made within a certain period and include evidence like comparable values or proof of valuation mistakes.

Separating tax assessments from property tax protects companies from possible unfair treatment. As a taxpayer, that’s good for you, but there’s more you need to know to ensure you’re being taxed fairly.

This blog post explains tax assessment vs. property tax in some detail and touches on how to appeal a property tax assessment if you feel you’ve been assessed unfairly.

Property taxes are based on the assessed value (the tax assessment) of a property. Understanding tax assessment vs. property tax starts with understanding how these two concepts work together.

Tax assessment

A tax assessment is a value attached to your real property and business personal property by the local government, specifically for the purpose of levying and collecting tax money used to support your community. The value will be based on the jurisdiction you’re in.

Under this broad definition, there are three types of specific values related to the assessment:

• The appraised value of your property is based on the fair market value, which is the price a willing seller would accept from a willing buyer through an arm’s-length transaction (a transaction in which both parties have equal bargaining power).
• The assessed value is an adjusted value: Appraised value/market value multiplied by the assessment ratio. (Sometimes exemptions are also then subtracted.) The assessed value does not affect the property’s appraised value or fair market value; it only affects the tax bill. Understanding the relationship between assessed value vs. tax bill is important when reviewing assessments and identifying potential errors.
  
• The taxable value is the assessed value minus any exemptions. The taxable value is multiplied by the jurisdiction’s tax rates to arrive at the tax liability. That number may then be adjusted further, if necessary, by applying any exemptions or penalties. Tax rates are not set by assessors, they’re set by taxing jurisdictions (a county or a city, for example).

Property tax

There are two types of property tax, real and personal. Real property tax is a tax levied by a government on the buildings and land within the jurisdictions, while personal property tax involves property not affixed to land, like equipment and furniture. You may only need one type assessed, or you may require both.

If you disagree with your property’s assessed value, you may choose to appeal a property tax assessment through either an informal or formal process. It’s important to note that an appeal isn’t always about value. It may be about some other aspect of the tax, such as a denial of an exemption, a clerical error, a dispute over the taxing jurisdiction, or something else. 

If you choose to appeal, you may make either an informal or formal appeal.

• An informal appeal may be settled in an informal manner, possibly over the phone with the assessor or by visiting the assessor’s office to discuss it in person. Often the issue is settled during this informal process.
• If the taxpayer and the assessor are unable to come to a resolution, a formal appeal is usually the next option (or, depending on the assessor, informal appeals may not be accepted). If a formal appeal is necessary, a specific appeal form may be required, or a letter of appeal may be accepted. 

If you’re successfully able to reduce your property’s value, it’s the appraised value that’s being reduced. As a result, the assessed value is then indirectly reduced because the appraised value is the starting point for the assessed value, before any assessment ratios and exemptions are applied.

If you receive a lot of assessments, chances are your team will be overwhelmed and want to simply process them before moving on to the next one. But that means you may miss opportunities to appeal. Be more proactive with Avalara Property Tax, which can help you prepare for, track, and stay on top of tax assessments so you can save time and take advantage of appeal opportunities and lower your tax burden.

Every assessment has a deadline for an appeal. Keeping up with a single deadline is manageable, but multiple deadlines can quickly become overwhelming. Avalara Property Tax shows all your deadlines — not only for assessment notices and appeal hearings, but also for return filings and tax bills. In one glance, you can see all your important tax due dates.

Better tracking isn’t the only benefit Avalara Property Tax offers. It can also help you save time. For example, you can use the displayed values and comparisons in conjunction with deadlines to quickly assess whether individual assessments should be accepted or flagged for appeal. It’s a welcome time-saver as your staff members proceed through their workflows, addressing assessments and other elements of the property tax cycle.

Another time-saving aspect is the ability to generate a prepopulated appeal letter. You can easily send this letter to an assessor to start the appeal process.

Avalara  prevents errors with data extraction software that automatically scans and extracts key data points from tax documents, reducing the need for manual data entry. For assessment notices, Avalara can extract notice values and appeal deadlines and import them into your existing tax database.

There’s more to knowing the tax cycle than simply understanding tax assessment vs. property tax — it’s also about handling tax-related activities efficiently and strategically. Avalara can help you stay on top of property tax bills, appeal more tax assessments, and spend more time on tax strategy, all of which can ensure you’re taxed fairly.

Ready to discover all the ways Avalara can help your team conquer the property tax cycle? Speak with us today.