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Assessed value
Assessed value is the dollar amount a local tax authority assigns to your commercial property for the purpose of calculating property 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.
It’s typically based on the property’s market value, adjusted by an assessment ratio. For example, a county might assess properties at 50 percent of market value.
Your tax assessor may also separate your property into two components:
- Land value
- Improvement value (buildings and structures)
Only the improvement portion relates to a structure that could be rebuilt—which usually has no relationship to the property’s insurable value.
Assessment practices generally vary by city, county, and state.
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 how much insurance coverage you need.
Insurance companies use completely different valuation methods, such as:
- Replacement cost value (RCV): What it would cost to rebuild or repair the property at today’s prices
- Actual cash value (ACV): The replacement cost minus the depreciation the building sustained over time
- Total insurable value (TIV): The full value of your property that needs coverage, which may include the building, equipment, inventory, and more
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.
If you rely on assessed value when choosing limits for commercial property insurance, you could unintentionally underinsure your business, leaving you exposed after a fire, storm, or other covered loss.
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While the formula varies by jurisdiction, many assessors calculate assessed value using:
- The property’s estimated market value
- An assessment ratio or tax rate
- Adjustments for land and improvements
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, if a county determines a building’s market value is $500,000 and applies a 50-percent assessment ratio, its assessed value would be $250,000.
Because assessment methods differ widely, small business owners should check with their local assessor’s office to understand how their specific taxes are calculated.
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
What's the difference between assessed value vs. market value and appraised value?
These three terms can be confusing, especially to first-time small business owners:
- Assessed value is set by a tax authority to calculate your property taxes.
- Market value is what your property would likely sell for today.
- Appraised value is what a licensed appraiser determines your property is worth based on a professional evaluation.
Assessed value is usually lower than market or appraised value because many taxing authorities only assess a percentage of the property’s actual worth.
Tips to manage your property’s assessed value
As you review your property’s valuation and choose coverage, remember the following:
- Don’t use assessed value to estimate your insurance needs. Let your insurer or agent help you calculate true replacement costs.
- Review your assessment annually. Reassessments can raise your tax bill unexpectedly.
- Check the breakdown. Look at how your assessor divides land value vs. improvements—only improvements relate to your building.
- Appeal if needed. If you believe your assessed value is too high, most jurisdictions allow property owners to file an appeal.
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Updated: November 24, 2025
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