ASSESSMENT RATIO Meaning and
Definition
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Assessment ratio refers to the percentage of an asset's fair market value that is used to determine its taxable value for certain types of assessments, such as property tax assessments. It is a key component in the calculation of property taxes and is utilized by local governments to determine the amount of tax that a property owner must pay.
The assessment ratio is typically set by the tax authority and can vary depending on the type and location of the property. For example, residential properties may have a lower assessment ratio than commercial properties. The ratio is often expressed as a percentage, such as 80% or 90%, and represents the proportion of the property's value that is subject to taxation.
To determine the taxable value, the assessment ratio is applied to the fair market value of the property, which is the estimated price that the property would sell for on the open market. For instance, if a residential property has a fair market value of $200,000 and an assessment ratio of 80%, the taxable value for property tax purposes would be $160,000.
Assessment ratios are designed to ensure that properties are assessed at a consistent and fair value for tax purposes. They help to distribute the tax burden among property owners based on the value of their assets. The assessment ratio, therefore, plays a crucial role in determining the amount of property taxes that individuals or businesses are required to pay.
Etymology of ASSESSMENT RATIO
The word "assessment" originated from the Latin word "assessus", which means "a sitting by", "council", or "duty". It later developed to signify the process of making an official evaluation or estimation of something. The term "ratio" comes from the Latin word "ratio", meaning "reckoning" or "calculation".
When combining these words, "assessment ratio" refers to the ratio or proportion used in evaluating or estimating the value of a property for taxation purposes.
