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If you own a home, there are two prices attached to it:
- The price you pay for it or can sell it for (that's the market value).
- What your home is officially worth (that's the assessed value).
Why two house prices? To keep things interesting—and to get you to pay your taxes. Your state charges you property taxes just for the privilege of living in the state. They charge more for the guy living in the McMansion than they do for the guy living in the one-bedroom bungalow (usually), but they still need to figure out who pays what.
Each state is a little different. Some states use a formula and don't even worry too much about what you paid for your house or what your house's value is. In California, you pony up 1.25% of the price you paid for your home, with some adjustments for inflation. In other states, an assessor takes a look at your home every so often and comes up with a dollar figure of what the house is officially worth for tax purposes. Usually, that number is lower than what you actually paid for your hose, and if you whine enough, the assessor may make an adjustment so that for that year at least, your tax bill can come down.