Assessment Ratio (Property) Definition
This is the assessed value in terms of dollars that an Assessor’s Office places on a piece of property. It is the market value as estimated by the Assessor. The appraisal department of a district estimates the values of properties and then uses these values to determine the property tax. The appraisal ratio is the ratio of the appraisal value to the market value.
In most countries, the asset value is 100% to that of the market. However, some people decide to value their assets below the market price because a high ratio leads to a higher property tax.
A Little More on What is the Assessment Ratio
Before the tax rate is calculated per the market price, the district is divided into tax zones. The fees charged on several of these tax zones form a property tax account. Each zone has a code in the property tax account. The properties have the same combination of tax zones and tax rates. When the tax rates for all the tax areas are set, they are added to the total tax rate, and then this total cost is multiplied by the estimated value to calculate the tax invoice.
The number of sets to be collected each year is usually limited in most countries. Any increase largely depends on how the real estate is classified. In New York, for example, single-family homes rating can’t exceed 6% per annum of 20% in a span of 5 years. Rental units which are less than ten cannot exceed 8% per year or 30% over five years.
A property owner may object the assessed value of his property by filing a complaint. A court or a review board then evaluate this assessment and then multiplied by the rate provided in the verdict. The level of appeal is assessed to get the value of a legal assessment.
Some rules are used in applying state tax rates. In some states, the proportions are determined by the legislator and then included in the state constitution, e.g., in Kansas and Maryland. Other states base the rates on asset types, e.g., industries and commerce. In Pennsylvania and New York, the rates keep varying from city to city. Usually, regional conditions keep changing every year.
References for Assessment Ratio
Academic Resources for Assessment Ratio
- Assessment-sales ratios under the Boston property tax, Oldman, O., & Aaron, H. (1965). National Tax Journal, 18(1), 36-49. This study attempts to analyze the pattern present in the property tax assessment deviations from the legally established standard of regular assessment at fair cash value.
- Assessment ratios and property tax burdens in Norfolk, Virginia, 1974–75, Pearson, T. D. (1979). Real Estate Economics, 7(2), 190-203. This paper used the ratios of property tax assessment to the sale price of residential properties sold during 1974 and 1975 to examine property taxes relationship with neighborhood housing.
- Effects of Property Taxation on Slums and Renewal: A Study of Land-Improvement Assessment Ratios, Schaaf, A. H. (1969). Land Economics, 45(1), 111-117. This is a report on the results of a study of two propositions, which are familiar, concerning the effects of property taxation on urban slums and renewal.
- Property tax administration: Use of assessment ratios, Behrens, J. O. (1977). Journal of education finance, 3(2), 158-174. This paper discusses how assessment ratios are being used to calculate and administer property tax.
- Property tax assessment discrimination against low-income neighborhoods, Baar, K. K. (1981). The Urban Lawyer, 333-406. This article shows how the assessment of properties in poor neighborhoods for property tax purposes is carried out at a higher percentage of market value than other properties in a specific area.
- On the degree of property tax assessment inequity in complex tax jurisdictions, Borland, M. V. (1990). American Journal of Economics and Sociology, 49(4), 431-438. This paper uses the extent of interest in the degree of property assessment inequity to show the importance of identifying the determinants of inequity in assessment.
- Measuring the performance of the property tax assessment process, Mehta, S., & Giertz, J. F. (1996). National Tax Journal, 73-85. This paper analyzes the efficiency of the assessment process while incorporating the measures of performance and those of resource cost.
- Stock market anomalies: A re-assessment based on the UK evidence, Levis, M. (1989). Journal of Banking & Finance, 13(4-5), 675-696. This paper uses the London Stock Exchange to provide evidence which proves the existence of various irregularities in the stock behavior of firms.
- A new view of property tax incidence, Aaron, H. (1974). A new view of property tax incidence. The American Economic Review, 64(2), 212-221. In this article, three propositions are documented which challenge the conventional view of the property tax.
- Property Tax in Texas under State and Federal Law, Yudof, M. G. (1972). Tex. L. Rev., 51, 885. This paper explains the concept of tax since most Americans do not understand the workings of the property tax system.
- Property tax limitations: An interpretative review, Anderson, N. B. (2006). National Tax Journal, 685-694. This study presents a motivation for the limitation measures which is that the property tax limits provide insurance against sudden increases in individual property tax liability.
- Property Tax Equalization in Illinois, Weil, R. A. (1953). National Tax Journal, 6(2), 157-167. This paper focuses on the equalization factor which ensures that the total equalized assessed value of real property in Illinois is equivalent to 33.5% of the fair market value.