Are property tax assessments based on purchase price or fair market price?

If I buy a foreclosed home at a steep discount, will my property tax assessment be based on the purchasing price or will the assessment raise the value to the market price, thus taxing me on the fair market price instead of the discount purchasing price?

Update:

People are saying "it depends", so is there a name or term I can search when I'm trying to find out which one a jurisdiction uses? Like the name of the law or method or something?

12 Answers

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  • zipper
    Lv 6
    4 weeks ago

    They are based on the appraisal of the property value, which the Township may do every couple of years, which is why tax goes up as well as the area school tax is part of this tax as well!

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  • R2D4
    Lv 6
    1 month ago

    depends on the state

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  • 1 month ago

    The tax assessment is based on what the county (land) tax assessor assessed it at. Over time as property values in a community rise (based on sales) so does the assessment.  I have 30+ years of data on my house, and the value almost always going up every year.  The assessor CAN (rarely) actually come visit the property, especially if you protest the newest evaluation.  Assessors also know about improvements by tracking permits for house renovations.  Aerial photos are also used. The county thought my neighbor had added onto his house, when the new roof area was actually just the covering of his carport.  ANSWER TO UPDATE: ask the county assessor's office.

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  • 1 month ago

    I read the answers.  People are clueless.  They are just guessing.  I happen to know.  It is based on the initial value of the house, when it was first built, with estimated increases.  It is NOT based on any particular purchase price and is NOT based on fair market value.  It does not take into account any renovations or additions or initial options given the initial house plan.  The county is NOT going to hire a certified real estate appraiser to determine fair market value and if, for example, a house was totally gutted inside and outfitted with high end everything, and a large addition was added, perhaps, everything upgraded, that will not be reflected in the tax assessment.  Basing it on the purchase price wouldn't work.  How can you compare a house that was purchased one year ago with a house that was last purchased 25 or 30 years ago, with people living there for all of those years?  You can't.

    Source(s): Certified Paralegal, with 25+ years' experience.
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    • DEBS
      Lv 7
      1 month agoReport

      When we purchased, the county assessed the house's value and came up with a number slightly higher.  This is how it happened for several others I know as well.  It's based on the county assessed value at time of purchase but not the actual purchase price.

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  • 1 month ago

    It will be based on assessed value, it is never base don purchase price.

  • DEBS
    Lv 7
    1 month ago

    I know of no place where the purchase price matters.  With exceptions mentioned the previous time you asked, it is the county assessed value.  Different counties have different ways of assessing the value.  It rarely matches the purchase price exactly, but it should be fairly close unless it was a less than arms length sale (such as to a family member).

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    • DEBS
      Lv 7
      1 month agoReport

      In CA when we purchased, the county assessed the house's value and came up with a number slightly higher. This is how it happened for several others I know as well. It's based on the county assessed value at time of purchase but not the actual purchase price.

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  • Judy
    Lv 7
    1 month ago

    The assessment will be based on FMV.

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  • 1 month ago

    The tax assessor will take all information into account to make the best judgement they can as to the fair market value.

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  • Don G
    Lv 7
    1 month ago

    I would argue that the assessed value can't be more than its market value. And its market value is what you paid for it. Don't let the jurisdiction give you phony arguments that they must follow their guidelines! Market value means just that.

    • Nuff Sed
      Lv 7
      1 month agoReport

      You can certainly have an assessed value higher than market value, at least until you file a proper petition for abatement.  l have had this happen with rural property when the local access road was condemned and there was no ready market for the property without complicated easement negotiations.

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  • 1 month ago

    Depends on the jurisdiction.  Most places do it off of a fair market assessment, but there are some that use the purchase price, adjusting for inflation each year.  

    I would assume that any jurisdiction that bases it off of purchase price would have some mechanism to adjust for homes that were obviously sold for far less than market price.  

    Responding to your update, try doing an internet search for the city, state the property is located in, along with the phrase "property taxes".  That should get you to the page of whatever the taxing authority is, and their website should have some page explaining how taxes are calculated.  

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    • Nuff Sed
      Lv 7
      1 month agoReport

      Properties are often sold at less than "market value" where the buyer and seller are not in the open market (for instance sell to a cousin for something other than "market value").

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