Does a Property Assessment Affect Property Taxes?
Absolutely. Your property taxes are based on an equation of the millage rate (or levy) multiplied by the government’s property assessment. (The millage rate/levy is the amount of money you pay per $1,000 of value.)
Some parts of the country have caps, or limits, on property taxes. That means, typically, that the total amount of money the government collects from property taxes is limited in the amount that it can increase. Example: If all the homes in your area last year paid $1 million in property taxes, then the amount of money they would pay next year would only rise by a certain percent – assuming that you’ve made no improvements on your home. The government is depending on new construction in those areas to help increase its tax rolls.
Another type of tax cap is based on assessments. If home prices are going through the roof and your house has increased in value, the assessment is only allowed to increase by a certain amount – as long as YOU own the home. Example: You and your neighbor both bought your homes at the same time for $200,000. You sell your home after 5 years for $250,000. The minute you sell your home, the new owner must pay taxes based on an assessment of $250,000, while your neighbor is still paying taxes based on a much lower amount (often a cap based on inflation).
Properties may be assessed by only one governmental agency, but that information is used by many more: the city, the county, the drainage district, the sewage district, the library district, the airport, and any number of others. In fact, the school district usually takes up a large chunk of your property taxes. Each of these entities has its own formula for using your property’s assessment to impose taxes on you.