Property Tax Terms, Defined
A comprehensive A–Z glossary of property tax terminology. From ad valorem to unequal appraisal — every term you need to understand your assessment, file an appeal, and navigate the property tax system.
Ad Valorem Tax
A tax based on the assessed value of property. The term comes from the Latin phrase meaning 'according to value.' Property taxes are the most common form of ad valorem taxation in the United States.
Agricultural Use Value
The value of land based on its productivity for agricultural purposes, rather than its market value for development. Many states allow agricultural land to be assessed at this lower value under current use or preferential assessment programs.
Appeal
A formal challenge to the assessed value or classification of a property. Property owners can appeal to the local appraisal review board, county board of equalization, or state tax court depending on the jurisdiction.
Appraisal
A professional estimate of a property's value, typically prepared by a licensed or certified appraiser. For property tax purposes, mass appraisal is used to value large numbers of properties simultaneously.
Appraisal District
A government entity responsible for appraising all taxable property within a defined geographic area, typically a county. Texas uses the term 'Central Appraisal District' (CAD). Other states use terms like 'county assessor' or 'board of assessors.'
Appraisal Review Board (ARB)
An independent panel that hears and resolves disputes between property owners and appraisal districts. In Texas, ARBs are county-level boards. Other states use similar bodies called boards of equalization, assessment appeals boards, or tax courts.
Assessed Value
The dollar value assigned to a property by the assessor for the purpose of calculating property taxes. In some states, assessed value equals market value (100% assessment ratio). In others, it is a fixed percentage of market value.
Assessment Ratio
The ratio of assessed value to market value, expressed as a percentage. A 100% ratio means assessed value equals market value. Many states use ratios below 100% (e.g., 70%, 50%, or 10%). Also called the 'level of assessment.'
Assessment Roll
The official list of all taxable properties in a jurisdiction, showing the assessed value of each property. Also called the 'tax roll' or 'appraisal roll.' Published annually by the assessor or appraisal district.
Assessor
The government official responsible for determining the assessed value of properties within a jurisdiction. May be elected or appointed. Also called 'county assessor,' 'tax assessor,' or 'chief appraiser' depending on the state.
Base Year Value
The assessed value established in a specific base year, used as the starting point for future assessments. California's Proposition 13 uses a base year value system where assessed value can only increase by 2% per year unless the property is sold.
Board of Equalization
A government body that reviews property assessments to ensure uniformity and equity within a jurisdiction. Hears appeals from property owners who dispute their assessments. Called 'Appraisal Review Board' in Texas and 'Assessment Appeals Board' in California.
Cap Rate (Capitalization Rate)
The rate of return an investor expects from an income-producing property, expressed as a percentage. Used in the income approach to value: Market Value = NOI ÷ Cap Rate. Derived from comparable sales of similar income-producing properties.
Central Appraisal District (CAD)
The Texas term for the county-level government entity responsible for appraising all taxable property. Each of Texas's 254 counties has a CAD. The chief appraiser leads the CAD and is responsible for all appraisals.
Chief Appraiser
The professional appointed to lead an appraisal district or assessor's office. Responsible for all property appraisals, staff management, and compliance with state appraisal standards.
Comparable Sales (Comps)
Recent sales of similar properties used to estimate the market value of a subject property. The sales comparison approach to value relies on comps. Good comps are similar in size, age, condition, location, and use.
Cost Approach
A method of valuing property based on the cost to replace or reproduce the improvements (buildings), minus depreciation, plus the value of the land. Most commonly used for new construction, special-use properties, and properties with no comparable sales.
Current Use Assessment
A preferential assessment program that taxes land based on its current use (agricultural, timber, open space) rather than its highest and best use for development. Available in most states; typically requires a multi-year covenant.
Depreciation
A reduction in property value due to physical deterioration, functional obsolescence, or external obsolescence. Used in the cost approach to adjust replacement cost down to current market value.
Effective Tax Rate
The actual tax rate paid as a percentage of market value. Calculated as: Annual Tax Bill ÷ Market Value. Differs from the nominal tax rate (mill rate) because assessed value may be less than market value.
Equalization
The process of ensuring that property assessments are uniform and consistent across a jurisdiction. State equalization boards review county assessment ratios to ensure all counties are assessing at the same percentage of market value.
Equal and Uniform
A constitutional principle in many states (especially Texas) requiring that all property be taxed equally and uniformly. An equal and uniform appeal argues that a property is assessed at a higher ratio than comparable properties, even if the absolute value is accurate.
Equitable Assessment
An assessment that is proportionally consistent with assessments of comparable properties. A property is equitably assessed if its assessment ratio is similar to the median ratio for comparable properties in the same jurisdiction.
Exemption
A reduction in the taxable value of a property, granted by law to qualifying property owners. Common exemptions include homestead, senior citizen, veteran, disability, and agricultural exemptions.
External Obsolescence
A loss in property value caused by factors outside the property itself, such as nearby industrial uses, highway proximity, economic decline in the area, or environmental contamination. Also called 'economic obsolescence.'
Functional Obsolescence
A loss in property value caused by deficiencies or super-adequacies in the property itself, such as an outdated floor plan, inadequate plumbing, or features that no longer meet market standards.
GRM (Gross Rent Multiplier)
A simple valuation metric for income properties: Market Value = Gross Annual Rent × GRM. Less precise than the income approach but useful for quick estimates. GRMs vary significantly by market and property type.
Highest and Best Use
The most profitable, legally permissible, physically possible, and financially feasible use of a property. Assessors are required to value property at its highest and best use, which may differ from its current use.
Homestead Exemption
A reduction in the assessed value or taxable value of a property used as the owner's primary residence. Available in most states; amounts and eligibility requirements vary significantly.
Income Approach
A method of valuing income-producing property based on the income it generates. The most common formula is: Market Value = Net Operating Income (NOI) ÷ Capitalization Rate. Used for apartments, commercial, and industrial properties.
Informal Hearing
An initial meeting between a property owner (or their representative) and an appraiser to discuss and potentially resolve a value dispute before a formal ARB hearing. Many protests are settled at the informal level.
Levy
The total amount of property taxes to be collected by a taxing unit in a given year. The levy is divided by the total assessed value of all taxable property to determine the tax rate.
Market Value
The most probable price a property would sell for in an arm's-length transaction between a willing buyer and willing seller, both fully informed, with neither under compulsion to buy or sell. The standard of value used for property tax assessments in most states.
Mass Appraisal
The systematic appraisal of large numbers of properties using standardized methods, common data, and statistical testing. Used by assessors to value all properties in a jurisdiction simultaneously, typically on an annual or multi-year cycle.
Mill Rate
The property tax rate expressed in mills (thousandths of a dollar) per dollar of assessed value. One mill = $1 per $1,000 of assessed value. A 20 mill rate on $200,000 assessed value = $4,000 in taxes.
Net Operating Income (NOI)
Gross rental income minus vacancy and credit loss, minus operating expenses (taxes, insurance, maintenance, management). Does NOT include mortgage payments (debt service). The numerator in the income approach formula.
Notice of Appraised Value
The annual notice sent by the appraisal district to property owners showing the proposed assessed value for the current tax year. Also called 'Notice of Assessment' or 'Assessment Notice.' The starting point for the appeal process.
Parcel Number
A unique identifier assigned to each parcel of land by the county assessor or appraisal district. Also called APN (Assessor's Parcel Number), account number, or property ID. Required on all appeal filings.
Personal Property
Movable property that is not permanently attached to land or buildings. In most states, business personal property (equipment, inventory, furniture) is subject to property taxes. Residential personal property is generally exempt.
Productivity Value
The value of agricultural land based on its capacity to produce income from farming, ranching, or timber operations. Used in Texas's 1-d-1 productivity appraisal and similar programs in other states.
Property Tax Consultant
A licensed professional who represents property owners in assessment appeals. In Texas, property tax consultants must be licensed by the Texas Department of Licensing and Regulation (TDLR). Other states have varying licensing requirements.
Protest
The formal process of challenging an assessed value in Texas. Property owners file a Notice of Protest with the appraisal district by the deadline (typically May 15 or 30 days after the notice date). Other states use the term 'appeal.'
Real Property
Land and anything permanently attached to it, including buildings, structures, and improvements. The primary subject of property taxes. Distinguished from personal property, which is movable.
Rollback Tax
Additional taxes owed when land that has been receiving preferential agricultural or open space assessment is changed to a non-qualifying use. Typically equals the difference between taxes paid and taxes that would have been paid at market value for the past 3–5 years, plus interest.
Sales Comparison Approach
A method of valuing property by comparing it to recent sales of similar properties (comparables). Adjustments are made for differences in size, age, condition, location, and features. The primary approach for residential property.
Tax Rate
The rate applied to assessed value to calculate the property tax bill. Expressed as a percentage or in mills. Set annually by each taxing unit (school district, county, city, special district) based on their budget needs.
Tax Roll
The official list of all taxable properties in a jurisdiction, showing assessed values, exemptions, taxable values, and tax amounts. Published annually after the assessment process is complete.
Taxable Value
The value used to calculate the actual tax bill, after all exemptions and deductions are applied to the assessed value. Taxable Value = Assessed Value − Exemptions.
Taxing Unit
Any government entity authorized to levy property taxes, including school districts, counties, cities, water districts, hospital districts, and other special districts. Multiple taxing units may levy taxes on the same property.
Uniform and Equal
See 'Equal and Uniform.' A constitutional requirement that all property be taxed at the same ratio of assessed value to market value.
Unequal Appraisal
An assessment that is higher than the median level of appraisal of comparable properties. In Texas, property owners can protest on the grounds of unequal appraisal even if the absolute value is correct.