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Assessed value

Assessed value is the evaluation of what your real estate is worth for the purpose of calculating municipal taxes.

What is assessed value?

Assessed value is a statement of what your real estate is worth for municipal tax purposes. Local tax authorities start with your property’s assessed value, apply applicable exemptions, and then multiply the total by your town or city’s mill rate to determine what you owe in taxes.

Is assessed value used in small business insurance?

Assessed value only relates to local taxes. It has nothing to do with commercial property insurance or other policies. When buying commercial property insurance, the key question to ask is whether you want to insure your building for its:

Replacement value: What it would cost to replace it with a similar building

Actual cash value: The replacement cost minus the depreciation the building sustained over time

If you decide on actual cash value, your insurance company will consider your building’s square footage, type of construction, and number of occupants in determining its replacement value. The higher that value, the higher your insurance premium will be.

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How do tax authorities determine assessed value?

There is no standard method for determining assessed value. Different communities use various methods.

For example, some use a property’s fair market value as its assessed value. To calculate the fair market value, tax authorities do an appraisal, identifying the price at which comparable properties in your area have sold. They also consider characteristics such as:

  • Size and configuration
  • Age and condition
  • Improvements such as decks and garages
  • Construction materials

Other communities apply a fixed percentage to a property’s fair market value to determine its assessed value for tax purposes. For example, a city might have a policy of assessing business property at a standard rate of 50 percent. Thus, if a building had a fair market value of $500,000, its assessed value would be $250,000.

How often do municipalities revise their property assessments?

Some tax jurisdictions reassess property values every year. Others do it:

  • Every other year
  • Only when a property changes hands
  • Based on a unique schedule

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Updated: April 29, 2022
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