A tax assessment is the process by which a tax authority determines the amount of tax a person or entity owes. It can refer to the evaluation of tax liability based on income, expenses, deductions, and applicable tax laws, or to the valuation of property for taxation purposes
. In the context of property taxes:
- A tax assessment is an estimated value assigned by the local government to real estate or personal property for tax purposes
- This value often starts with the appraised value, which reflects the fair market value—the price a willing buyer would pay a willing seller under normal conditions
- The assessed value is then calculated by applying an assessment ratio to the appraised value, sometimes adjusted by exemptions
- The taxable value is the assessed value minus any exemptions, and this value is multiplied by the local tax rate to determine the property tax owed
In the context of income or other taxes:
- A tax assessment is a formal determination made by the tax authority to calculate the tax liability based on financial records and declared information
- It can be a self-assessment by the taxpayer or an assessment issued by the tax authority, especially if discrepancies or underreporting are suspected
- Assessments can be provisional (interim) or final, and taxpayers have the right to contest or appeal them
Separation from taxation:
- The assessment function (valuing property or determining tax liability) is distinct from the taxation function (setting tax rates and collecting taxes), which helps protect taxpayers from unfair treatment
In summary, a tax assessment is the official evaluation of how much tax is owed, either by valuing property or calculating tax liability based on income or other factors, serving as the basis for tax collection by government authorities.
