First, let me say that this post is designed for Pennsylvania residents as our properties are reassessed roughly every 30 years.
What is my property assessment?
What is your assessment, anyway? Well, it’s a couple of things. In its most basic form, it is the value at which the county tax assessor has assessed your property’s value. So, in theory, it’s what your house is worth. And (again, in theory, and I’ll get to the reason in a bit), it was the value of your house at the time that assessment occured. The reason is is not an accurate reflection of the current market of your property is that the assessment is around 30 years old (or less, if the home is newer than that). So it’s quite rare that your home’s assessment is a reliable predictor of today’s value.
Then why do I care about the assessment?
The reason you care about the assessed value of your property is that it is the number upon which your taxes are based. If your assessment is lower than your neighbor’s, your taxes are lower. Here is how the assessment affects your taxes: the different tax bodies (county, municipal, school) determine their budgets for the coming year. Then they take all the assessment values from all the real estate in their purviews and divide the budget by that total assessment dollar amount. The result is a multiple referred to as a millage rate. It’s that number, that changes annually, that is multiplied to your property’s assessment value that determines your taxes. So, for example, if the school district millage rate is 30, and your property assesment is $315,000, your school taxes would be $9,450.
When or why are properties reassessed in PA?
Unlike in many locales, the sale of a property (unless it’s new construction) does NOT trigger an assessment. Taxes do not change based on the sale. However, there are events which will result in an updated assessment. Those events include adding bathrooms, adding square footage (they will always increase your assessment). There are also potential assessment changes if a property owner challenging the current assessment.
When might it make sense to request a reassessment?
If you determine that your property has appreciably higher taxes than nearby properties of similar current market value, you might consider a reassessment. Often, these discrepancies are the result of your home being newer than the surrounding ones–if yours is 10 years old, but the other are much older, your assessment will reflect its value when it was originally assessed, which was five years ago. Let’s say that most of the neighborhood has homes that are 50 years old or more. In order for them to be of similar value, we will assume they have been renovated. If you can provide an appraiser’s or real estate agent’s current market assessement of homes that are worth roughly what they say your is worth, then your taxes should be similar. But remember, those other houses were probably last assessed 30 years ago, when values were less. That would be a scenario in which a request for reassessment could lower your taxes.
When it’s not wise to ask for a reassessment
Often, when people are selling their homes, if they believe the county tax record lists their square footage as less than they believe it to be, they suggest having it reassessed. Their idea is that, if the record shows more square footage, they can expect a higher price. While that logic is not wrong, they often don’t realize that initiating a request for a reassessment may result in their taxes increasing, often by a lot. Why? Because, remember, if their last assessment was 30 years ago, their new one will be in today’s dollars. So the assessment (with or without the country agreeing that there is previously unaccounted-for square footage) will increase. And when the assessment increases, the taxes increase. And THAT will be a turn-off to buyers. Additionally, if the house doesn’t sell, the owner has now increased his own taxes.
I hope to have cleared up some of the confusion surrounding tax assessments in PA and how/why you should care about them. For more Q and A about taxes, click here.
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