What is the basis of a property tax assessment?

To function, local governments collect property taxes from commercial property owners and homeowners within their borders. The amount of taxes a property owner pays depends on the assessed value of the property and the local tax rate.  A tax assessment is an opinion of value from the local tax assessor. Because there are many factors that affect a property’s value, assessments can often be wrong. Consequently, the resulting assessment can be excessive or discriminatory.

Excessive/Discriminatory Assessments

Your assessment may be excessive or discriminatory if it meets one of these two standards:

1. True Market Value Standard. In a tax year where the municipality conducts a district wide revaluation or reassessment, all assessments are 100% of true market value. Evidence for a tax appeal should generally precede the October 1st assessment date,. However, some post-October 1 evidence is permissible to support pre-assessing date data.
2. “Common Level Range” Standard. In tax years where there is no revaluation or reassessment, the Tax Court or County Tax Board will use what is known as the “common level” to determine whether your property’s assessment falls outside the permissible range. The “common level” is different for every town. Accordingly, the “common level” helps promote uniformity and stability in a municipality’s tax base in non-revaluation or reassessment years.                                                                                                         

​Sale Price v. Assessed Value

The NJ State Division of Taxation, with assistance from local assessors, annually conducts a survey of real estate sales in every town in the state. The primary purpose of the study is to help allocate school aid funds among New Jersey municipalities. However, it plays an important role in determining whether your assessment is fair. In the annual survey, every sale price in town is compared with the property’s assessment value. These comparisons yield a ratio of sale price to assessed value.

The average of the sale price to assessed value ratios is known as the average ratio, or Director’s average ratio, or simply the Director’s ratio. The Director’s ratio represents the “common level” of assessment in your community. In any year except the year of a district-wide revaluation or reassessment, the common level of assessment is used by the Tax Court or County Tax Board to help determine the fairness of your assessment. 

What if I don’t think my assessment is fair?

You may appeal your property’s assessment every year. Therefore, depending on the assessed value of the property, you may file at the County Tax Board or state Tax Court. Once the Tax Court or County Tax Board determines the true value of the property on appeal, it must compare the property’s true value to the assessed value. 

If the ratio of assessed value to true value exceeds the Director’s average ratio by 15%, there is a reduction of the assessment. 

On the other hand, if the assessed value to true value ratio falls below the common level, the Tax Board must increase the assessment to the common level. 

The taxpayer must supply the County Tax Board with sufficient evidence to determine the true market value of the property. Appellants should know their district’s average ratio before filing a tax appeal. This ratio changes each year for use in the next tax year.
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Have Questions or Need Help?

As a property tax appeal lawyer, I know the complexities of these concepts. Hence, it is common for business owners and homeowner to have questions. Please call me if you need more information or clarification. Also, if you think that your property taxes are too high, contact me for a free assessment review. I can tell you if your property’s assessment is excessive or discriminatory.