Understanding Your Property Taxes

by Coldwell Banker Evergreen Olympic Realty, Inc. on October 28, 2012

As our local housing market continues to improve, it can be a challenge to understand the relationship of assessed value to the amount of property taxes owed. We continue to field questions from clients puzzled by the fact that their taxes are the same, or even higher, but their assessed value is lower.   The following is reposted from an earlier article we’ve written on this topic.

Q: My home’s assessed value went down this last year, but my property tax payments actually went up. How is that possible?

A: Property tax math is a funny thing. The most important question when determining how much you might pay is how your property’s value changes relative to the area average change in value.

The government is limited in how much it can raise taxes from year to year. The total amount collected for property taxes can increase only by the lesser of 1% a year or the amount of inflation (additional increases, such as levies must be voter approved). It is rare to see the total amount collected actually go down.

Once the government determines the total amount it is going to collect from property taxes, it then apportions that amount across the property owners in the county based on property values. This is why it is important to know where your value change stands relative to the average change in the taxing area.

If your property’s assessed value falls more than the area average, your share of taxes paid will be less. In this case, you could be paying less than the previous year. However, if your assessed value fell less than the area average you will pay more in taxes.

Q: Why is my tax assessed value so much different than the values of homes I am seeing sell in my neighborhood today?

A: Property tax assessed values for the current year are not based on today’s market value. Instead, assessed values are determined on January 1st of the year before the tax year. For instance, the taxes you are paying in 2012 are based on an opinion of your property value set on January 1, 2011. That means the assessor was reviewing 2010 property sale prices. The sales that are happening today will impact your assessed values in 2014 (and with property values now stabilizing, we expect to see future assessments level out too).

{ 1 comment… read it below or add one }

Joe White December 26, 2012 at 1:53 pm

Here in Philadelphia, we are seeing a similar dynamic with our real estate taxes.
The city is attempting to slightly increase the real esate tax, but they are also assessing each property, which havent ever reall been properly assessed.

In Philadelphia, I have seen one home, selling above $850,000, which the city currently has assesed at $12,000.

Obviously, the slight tax increase is not the issue….the concern is that the tax on Philadelphia properties will sky rocket to astronomical levels. Obvously, this will be devestating to our real estate market growth, not to mention those on fixed incomes, like Seniors that have lived in their homes, all their lives.


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