Why It Matters
Your property tax bill equals TAV times the local millage rate divided by 1,000 — a $320,000 TAV at 25 mills is an $8,000 annual bill. The critical issue: assessed value is rarely the same as market value. Most jurisdictions apply an assessment ratio (e.g., 80%), and that estimate can be years out of date. Many states — Texas, Ohio, North Carolina — reassess to market value when a property transfers, which can double the tax bill on an acquisition you modeled using the seller's current figure. That post-sale reassessment is the most common underwriting error in buy-and-hold investing. If the assessor sets your value too high, you can appeal — a successful challenge reduces your annual bill permanently until the next reassessment cycle.
At a Glance
- What it is: The value a county assessor assigns to a property for calculating property taxes — not a market value indicator and not the same as appraised value or purchase price
- Assessment ratio: Most jurisdictions assess at less than 100% of market value (80% assessed on a $400,000 property = $320,000 TAV)
- Formula: Property tax = TAV × millage rate ÷ 1,000 ($320,000 TAV at 25 mills = $8,000/year)
- Reassessment on sale: Many states reset assessed value to market value when a property transfers — potentially tripling the seller's tax bill on a long-held property
- Appeal right: Property owners can challenge over-assessments — deadlines are strict, typically 30–90 days after notices are mailed
Property Tax = Tax Assessed Value × (Millage Rate ÷ 1,000)
How It Works
How the county sets your assessed value. Assessors conduct mass appraisals on a regular schedule — annually in some states, every two to four years in others — using comparable sales, an income approach for commercial properties, or cost approach for new construction. That market value estimate is multiplied by the jurisdiction's assessment ratio to produce the TAV. Some owners qualify for exemptions (homestead, senior, agricultural) that reduce the TAV before the millage rate is applied; investment properties rarely qualify for the most favorable ones. The resulting TAV is public record on the county assessor's or auditor's website.
The reassessment-on-sale trap. This is the most consequential issue for buy-and-hold investors. In states like Texas, Ohio, and North Carolina, assessed value resets to approximately market value — often the purchase price — when ownership transfers. A property with a $248,000 TAV and a $6,200 annual property tax bill, acquired for $395,000, can be reassessed to $356,000 post-close and produce an $11,200 bill. That $5,000 swing compresses cap rate and can flip a solid deal to a breakeven. California's Prop 13 is the notable exception — it caps annual increases at 2% regardless of appreciation. Always confirm your state's reassessment rules before modeling post-acquisition taxes.
Appealing an over-assessment. If the county's TAV exceeds market value, you can appeal. Most jurisdictions offer an informal review stage before a formal hearing with the county board of assessment appeals. The burden of proof is yours: comparable sales, a recent appraisal, or your purchase price if the acquisition was recent. Residential investors typically handle appeals themselves. For commercial properties, tax consultants often work on contingency (20–33% of first-year savings). A special assessment is a separate charge on top of standard property taxes and requires a different challenge process — don't conflate the two.
Real-World Example
Sandra is evaluating a triplex in Columbus, Ohio listed at $395,000. The current owner's tax bill shows $6,197/year on a $248,000 assessed value. Sandra models the deal at 6.8% cap rate and it looks solid — until she checks Ohio's reassessment rules.
Ohio resets assessed value to market value upon sale. She pulls the Franklin County Auditor's site and confirms the assessment is three years old. Post-acquisition, the county will reassess to approximately the purchase price.
The math: new TAV at $355,500 (90% of $395,000) × 31.48 mills = $11,192/year — $4,995 more than the seller pays. That drops the cap rate to 5.9%, below her 6.5% floor.
Sandra adjusts her offer to $368,000. Projected new TAV: $331,200, producing ~$10,426/year in taxes. Cap rate holds at 6.5%. The seller accepts.
Pros & Cons
- Knowing reassessment rules lets you project post-acquisition taxes accurately — not inherit a number that changes after closing
- Over-assessed properties are fixable — a successful appeal permanently reduces the bill until the next cycle
- TAV is free public data on county assessor and auditor websites
- In low-reassessment states (Prop 13, Oregon's Measure 5), long-held properties carry artificially low tax burdens — a potential advantage for buyers
- The assessment ratio lets you back-calculate the county's implied market value as a secondary data point
- Assessed value is rarely an accurate market value indicator — can be 20–40% off depending on assessment age and market movement
- Many investors use the current owner's tax bill without checking whether the state reassesses on sale — the most common buy-and-hold underwriting error
- Assessment schedules vary: a value set three years ago in a rising market may be significantly stale
- State rules differ sharply — Texas reassesses on sale; California's Prop 13 does not; never assume rules transfer across state lines
- Appeals are not guaranteed; assessors have home-field advantage
Watch Out
Never use the current tax bill without confirming reassessment rules. The most common underwriting error is plugging the seller's property tax figure into a pro forma without checking whether the state reassesses on sale. A quick search — "[state name] property tax reassessment on sale" — tells you what to expect. Model the post-sale assessment, not the pre-sale one.
Assessed value is not market value. The county's assessment can diverge 20–40% from actual value in either direction. Never use TAV to determine what a property is worth or to anchor an offer price. Use comparable sales and income approach for acquisition decisions. The county's number is useful for exactly one purpose: projecting the tax bill.
Appeal deadlines are strict. Every jurisdiction publishes a window — typically 30–90 days after assessment notices are mailed — to file a property tax appeal. Miss that window and you wait until the next assessment cycle, which may be one to four years away. Calendar the deadline the day your assessment notice arrives.
Ask an Investor
The Takeaway
Tax assessed value drives your property tax bill — one of the largest recurring expenses in a rental portfolio, and one of the most commonly misjudged. The two mistakes investors make most: using the seller's current tax bill without accounting for post-sale reassessment, and treating assessed value as a proxy for market value. Get the correct projected tax figure before closing by checking your state's reassessment rules and modeling the likely post-acquisition assessment. And when the assessor's number looks too high — appeal it. A successful challenge cuts thousands of dollars from annual operating expenses permanently.