How Property is Valued for Property Tax Purposes

New Jersey’s real property tax is “ad valorem” meaning that each person pays tax based on the value of the property they own.

Standards for Valuing

Property

New Jersey courts have determined “full

and fair value,” “market value,” and

“true value” to be synonymous.

True value is the price at which, in the

assessor’s judgment,

real property would

sell for at a fair and

bona fide sale.

roperty is to be

assessed for

taxation purposes by

general laws and

uniform rules. All real property must be

assessed according to the same standard of

value except for agricultural/horticultural

land.

rue market value

is the likely price

that a property will bring

in a competitive market

under essential conditions for a fair sale.

It assumes that there is a willing buyer

and willing seller and neither is negatively

Influenced; e.g. selling property to finalize

a divorce. Market price is the actual

amount that is paid for a property. The

actual price paid is not always what the

property’s true value is on the real estate

market.

Factors Affecting Property Value:

Economic

 Purchasing power

 Wage levels

 Employment rates

 Inflation

 Recession

 Housing

 Shortage/Surplus

 Interest/Mortgage Rates

 Construction costs for

materials and labor

Environmental

 Geography and location

 Weather conditions

 Soil types

 Waterways

 Surrounding neighbors

 Proximity to schools, churches,

stores, transportation

Physical Characteristics

 Surrounding properties

 Comparable properties

 Subject property in terms of :

Government

 Public service e.g. police/fire protection

 Zoning ordinances

 Building codes

 Taxes assessed

Methods of Valuing Property:

here are 3 methods for determining property

value for tax purposes.

Selection of a method depends

on the nature of the property.

 Cost of replacement

 Market data or sales comparison

 Income approach

Cost of Replacement

Commonly used for new construction; it

estimates the cost of building that structure.

The new building is compared with another

building that has the same or equal

functionality. The land value is added to the

cost of the building improvements minus

depreciation if not new construction to get the total

value of the property.

 Construction quality

 Age

 Maintenance level

 Depreciation

 Architectural style

 Lot size or acreage

Sales Comparison

This method determines the market value by

comparing similar properties that have

been sold in the municipality. The following

factors may be used to calculate the value.

 Number of rooms

 Size of the rooms

 Quality of material

 Quality of workmanship

 Physical condition

 Location

 Time of the sale

Income Approach

This method determines the market value

based on the property’s income-producing

capabilities.

analyzes the future income

stream...

to determine

the purchase price...

estimating what could be

the future benefit...

All 3 methods should be used when possible

in the valuation of every property. One

method may be more relevant than the others

and given more weight in the valuation process.

Revaluation, Reassessment and Compliance Plans:

Revaluation/Reassessment

These programs may be needed when there is evidence that properties are not

assessed uniformly throughout the taxing district. The intention of the process is

to distribute the tax burden equitably amongst taxpayers by assessing each

property according to its true value.

Added Assessment

New construction, structural additions and improvements completed during the

tax year are valued and taxed so that the property does not avoid its fair share of

the tax burden for the rest of the year.

Omitted Assessment

An omitted assessments is an assessment, that by error, was not placed on the

property at the right time.

Appeals

Taxpayers who disagree with their property’s assessment have the right to file an

appeal with their county tax board. The taxpayer can appeal directly with the

New Jersey State Tax Court if the property is assessed for more than $1,000,000.

Appeal Form A-1

www.state.nj.us/treasury/taxation/pdf/other_forms/lpt/petappl.pdf

Contact Your Local Municipal Tax Assessor

Email: Taxation.prop[email protected]j.gov

Telephone: 609-292-7974 or 609-292-7975

Fax: 609-292-9439