County assessment offices assign value to properties and apply an assessment ratio to calculate property tax bills. An assessment ratio is the ratio of assessed value to market value. Many counties assess property at 100 percent of market value; however, some assess property at less than market value. Property tax bills are higher when ratios are higher.
Tax Code Areas
Before the assessment ratio applies to the market value, the County Clerk separates the county into tax districts. Charges from several tax districts make up a property tax bill. Each district has a code that lists on the property tax bill. All property is subject to the jurisdiction of the same combination of tax districts and has the same combination of tax rates. Once tax rates for all tax districts are set, the County Clerk adds them to arrive at an aggregate rate, and multiplies this aggregate rate by the assessed value to calculate the property tax bill.
Many counties have limitations in how much they can increase the assessment ratio each year. In many cases, the amount of the increase depends on the property classification. For example, in New York the assessment ratio for a single-family residential property cannot increase by more than 6 percent each year or 20 percent in five years. For rental properties with ten units or less, the ratio cannot increase more than 8 percent each year or more than 30 percent in five years.
Property owners have the option of appealing the assessed value if they do not agree with it. If a property owner submits an assessment appeal, the assessment board or court will decide on the current fair market value and multiply it by an assessment appeal ratio. The assessment appeal ratio is different from the regular ratio. The assessment appeal ratio is necessary to arrive at a lawful assessed value.
Various states have different rules for applying tax assessment ratios. In some states, they are uniform throughout the state. The state legislature determines the ratio and drafts it into the state constitution. A few examples of this are Kansas, Maryland, Nevada, Colorado and Arizona. Other states base the assessment ratio on the type of property, such as industrial, commercial, residential or agricultural. States such as Pennsylvania, New Jersey and New York have ratios that vary by town or municipality. One town may have a completely different ratio than a neighboring town. Local ratios tend to change annually.