What Is Assessed Value?
Assessed value is what your county or city uses to calculate property tax. It's typically a percentage of market value (e.g., 80% in Cook County, Illinois, or 100% in some California counties). The formula: Assessed Value = Market Value × Assessment Ratio. If your assessment is too high, you can appeal—successful appeals in markets like Phoenix or Atlanta often reduce taxes by 10–20% for investors who document comparable sales.
Assessed value is the dollar amount a local government assigns to your property for property tax purposes—often 70–100% of fair market value, depending on the jurisdiction.
At a Glance
- What it is: Government-determined value for tax calculation
- Why it matters: Directly drives your annual property tax bill
- Typical range: 70–100% of market value, varies by state and county
- Appeal window: Usually 30–90 days after assessment notice; deadlines vary by jurisdiction
Assessed Value = Market Value × Assessment Ratio
How It Works
The assessment process. Local assessors value properties periodically—annually in some states, every 2–5 years in others. They use mass appraisal methods: comparable sales, cost approach, and income data for commercial/rental properties. The result is the assessed value. Your tax bill = Assessed Value × Tax Rate. A $300,000 assessed value at 2% rate = $6,000/year in taxes.
Assessment ratio. Many jurisdictions don't tax 100% of market value. Illinois uses different ratios by property type—residential might be 10% of market, commercial 25%. Texas caps homestead increases at 10%/year but investment properties can rise faster. Know your local rules—the ratio determines how much of your fair market value gets taxed.
Why it lags market value. Assessments are backward-looking. A hot market in Austin or Nashville can push fair market value 15% above last year's assessment. Conversely, a downturn might leave your assessment above what you could sell for. That lag creates appeal opportunities when you can prove the assessment exceeds current market.
Real-World Example
Memphis duplex appeal. You buy a 2-unit for $185,000 in 2024. The county's 2023 assessment shows $198,000—based on pre-purchase comps. You pull three recent sales within 0.5 miles: $172,000, $179,000, $183,000. Average: $178,000. You file an appeal with the comps and closing statement. The board reduces assessment to $182,000. At Shelby County's 2.25% effective rate, you save $360/year. Over 10 years, that's $3,600 in tax savings—real money for a 30-minute appeal.
Pros & Cons
- Predictable—you know the basis for your tax bill
- Appealable—documented comps often win reductions
- Public record—assessments are searchable for due diligence
- Can signal value—high assessment in a rising market may justify higher property tax reserves
- Often lags fair market value—can be stale by 1–3 years
- Inconsistent across jurisdictions—no national standard
- Appeal process varies—some counties are investor-friendly, others hostile
- Reassessment after purchase can spike taxes—especially in states that reassess on sale
Watch Out
- Reassessment trigger: In many states, a sale triggers reassessment at purchase price. A $400,000 buy in California can double the previous owner's tax bill overnight.
- Appeal deadline: Miss the window (often 30–90 days) and you're stuck for the year. Calendar it.
- Over-improvement risk: A major rehab can trigger a higher assessment. Factor potential tax increase into your arv-calculation and pro-forma.
- Homestead vs. investment: Homestead exemptions don't apply to rentals. Your duplex gets taxed at full assessed value.
Ask an Investor
The Takeaway
Assessed value drives your property tax bill. It's usually 70–100% of market value and often lags current fair market value. Appeal when you have strong comps—investors in Phoenix, Atlanta, and Memphis routinely save 10–20% with documented appeals. Know your reassessment rules, especially in states that reassess on sale.