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Definition of Equalization Rate - A Property Tax Term

Definition of equalization rate or equalization ratio

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Definition of equalization rate: a ratio of total assessed value for properties in a community to those property’s true market values. This number represents the state or localities judgment of how closely assessed values match the market value. For example, an equalization rate of 90% would mean that, on average, the property in a community is being assessed at 90% of its market value.

What Are Equalization Rates Used For?

Some states and/or localities require that all municipalities value property at the same assessment-to-market-value ratio. They might require, for example, that all properties are assessed at an average of 80% of their market value.

Equalization rates are used to ensure that property taxes, especially those paid by members of multiple jurisdictions, are assessed equally and in proportion to fair market value across all municipalities.

Equalization seeks to ensure, for example, that a taxpayer in one community whose property has a fair market value of $100,000 will pay the same taxes as a property with a fair market value of $100,000 in another community, regardless of how those two properties are assessed.

 

Also known as: equalization ratio

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