What is Assessed Value?
Assessed value refers to the value of an asset -- usually real estate -- as determined by an assessor for tax purposes. The assessed value is often computed by incorporating the purchases and sales of similar properties in nearby areas.
How Does Assessed Value Work?
Let's assume you own a house. The property tax assessor in your municipality will likely assign a value to the house and calculate your property taxes based on that assessed value.
If the property tax rate is 4% and your home's assessed value is $200,000, then your yearly property tax liability would be $8,000 (.04 x $200,000).
Why Does Assessed Value Matter?
Although assessed value is a term used in conversations about property taxes, it is also an important factor in municipal bond issues. Because many municipalities receive a large portion of their local revenue from property taxes, the ratio of assessed value to net debt is an indicator of the quality of the bond issue.
It is also important to note that assessed value is usually not the same as a property's fair market value.