Why does a home's assessed value for property tax purposes often differ significantly from its market value?

Property taxes are based on assessed value, which is determined by the local county or municipal assessor using comparable sales, cost approaches, or income approaches. Reassessments may happen annually, every few years, or only upon sale depending on the jurisdiction. States like California (under Proposition 13) cap annual assessment increases at 2% per year, which means long-term homeowners can have assessed values far below market value. Buyers should research local reassessment practices because purchasing a home can trigger a reassessment to the new purchase price, significantly raising the property tax bill.