Glossary of Property Tax Terms

The following alphabetical listing of terms is provided to help you understand property valuation and tax assessment:

Abatements – abatements reduce the amount of tax by providing a reduction.

Actual Assessed Value – the assessment established for all tax classes.

Ad Valorem – a tax based on the assessed value of real estate or personal property. Ad valorem taxes can be property tax or even duty on imported items. Property ad valorem taxes are the major source of revenue for state and municipal governments. Municipal property ad valorem taxes are also known as “property taxes.”

Assessed Value – the property value given for tax purposes. Finance determines a property’s assessed value by multiplying its estimated full market value by the assessment ratio for the property’s tax class.

Assessment Ratio – the ratio of assessment value to market value. The assessment ratio is also called the uniform percentage of value and the assessment rate.

Assessment Roll – a list of the assessed value of all properties in a jurisdiction.

Billable Assessed Value – the assessed value on which the tax liability for all classes is based.

Capitalization – the process by which anticipated future income and benefits are converted to a present value.

Capitalization Rate – a rate of return used to produce the capital value of an income stream.

Comparable Sales Method – the process of estimating a property’s market value based on the sales prices of similar properties. The Method is also known as market approach.

Exemptions – exemptions provide tax relief by reducing a property’s taxable assessed value, that is, the base amount to which the tax rate is applied. A property may be fully or partially exempt.

Exempt Value – the amount or percentage of assessed value that is not subject to tax.

Fiscal Year – a 12-month period used for financial reporting.

Income Capitalization Approach – a method of valuing property by leaving out the net operating income to arrive at a present worth estimate.

Market Value – the likely price a property should command in a competitive and open market.

Notice of Property Value – the annual notice mailed to property owners that shows how their property’s market value is estimated. It also shows any exemptions that have been granted for the upcoming tax year.

Operating Expenses – includes all expenses necessary to maintain a property and/or its income excluding debt service. Property taxes are omitted for assessment purposes.

Replacement Cost – the cost to construct, at current prices, an improvement equivalent in utility to an existing structure, using modern building materials and according to current standards and building requirements.

Reproduction Cost – the cost to replicate an existing structure, using the same materials, standards, quality, design, etc. as the original structure.

Tax Rate – the amount, usually expressed in dollars per hundred of assessed value, applied to the tax base to determine tax liability.

Taxable Assessed Value – this is the assessed value minus any exemptions and limitations.

Taxable Status Date – the date the assessed value, taxable status and, if applicable, tax class are fixed for all properties in a taxing jurisdiction.