Homeowners routinely compare the wrong two numbers and either panic or relax for no reason. Untangling assessed value, market value, the assessment ratio, and the effective tax rate takes about five minutes, and once you have it, your assessment notice stops being a mystery.
Market value: what it would sell for
Market value is the price your home would fetch in an ordinary, open-market sale, with a willing buyer and a willing seller and neither under pressure. It is what a real-estate agent estimates when you think about selling, and what an appraiser calculates for a mortgage. It moves with the market, and it is the anchor for an over-assessment appeal, because your whole argument is that the taxable value has drifted above what the home is actually worth.
Assessed value: what actually gets taxed
Assessed value is the figure your county uses to calculate your tax. Here is the catch that confuses everyone: in many states the assessed value is not the full market value. It is a fixed percentage of it, set by state law. That percentage is the assessment ratio (sometimes called the assessment level or the level of assessment).
Ratios vary enormously. Some states assess at 100% of market value, so assessed and market value are the same. Others use ratios well below 100%. The ratio itself is usually not something you can appeal, because it is set in law and applied to everyone. What you appeal is the market value the assessor started from, because that is the input that flows through the ratio into your bill.
The effective tax rate ties it together
Because ratios differ so much, the raw tax rate (often quoted in mills, or dollars per thousand of assessed value) is not comparable across places. The number that actually matters to you is the effective tax rate: the tax you pay as a percentage of your home's market value.
| Step | Figure |
|---|---|
| Market value (assessor's estimate) | $400,000 |
| Assessment ratio | 40% |
| Assessed value ($400,000 × 40%) | $160,000 |
| Nominal tax rate on assessed value | 3.375% |
| Annual tax ($160,000 × 3.375%) | $5,400 |
| Effective rate ($5,400 ÷ $400,000) | 1.35% |
The effective rate, 1.35% here, is the honest apples-to-apples number. It is also the multiplier you use to turn an over-assessment gap into annual dollars: a $40,000 reduction in market value at a 1.35% effective rate saves about $540 a year.
Why the two numbers drift apart
Assessed and market value diverge for a few structural reasons, not just the ratio:
- Reassessment lag. Many counties reassess only every few years. Between reassessments, your assessed value can fall out of step with a moving market, in either direction.
- Mass appraisal. Assessors value thousands of homes with models, not visits, so individual homes get generic assumptions that may not fit.
- Assessment caps. Some states limit how much an assessment can rise per year, which can hold assessed value below market for long-time owners and produce odd gaps between neighbors.
These are exactly the seams where an over-assessment hides, especially a home whose condition or local market has softened since the last reassessment.
What this means for an appeal
The practical upshot: when you appeal, you are challenging the assessor's market value, and you prove it with comparable sales, because a lower market value flows through the ratio into a lower assessed value and a lower bill. Do not waste breath arguing the ratio or the tax rate; those apply to everyone and are set by law. And when you estimate your savings, run the market-value reduction through your effective rate, not the headline mill rate, so you know the real annual dollars at stake.
To check whether your assessor's market value is actually too high in the first place, see how to tell if your home is over-assessed. To turn that into a filed appeal, see how to appeal, step by step.
The short version
Market value is what your home would sell for. Assessed value is market value times your state's assessment ratio, and it is what the tax rate is applied to. The effective tax rate (tax as a share of market value) is the number that lets you compare places and size up your savings. You appeal the market value, because that is the input you can move.
See both numbers for your own home.
The report puts your assessed value next to an independent market estimate, works out the gap, and applies your local rate to show the annual overpayment, so the comparison is done for you.
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