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Special Assessment Tax: A Definition

April 24, 2024 4-minute read

Author: Melissa Brock

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As a homeowner, you’re obligated to pay a number of fees, including your property taxes. You might also notice that, in addition to regular property taxes, you may also have to pay a special assessment tax. But what is a special assessment in real estate, and what is the special assessment tax?

Below, we’ll talk about what a special assessment is, how it works and who pays it. Then, we’ll answer some frequently asked questions about special assessment taxes.

What Is A Special Assessment Tax?

A special assessment tax in real estate is an additional property tax assessed by the local government to pay for your property and neighborhood improvement projects. The tax goes toward a specific geographic region known as a special assessment district, and the property owners in that area are the only ones who must pay the tax.

Some counties list special assessments on the non-ad valorem tax line of a property’s bill, but they don't always do this.

What’s The Difference Between Local Special Assessments Vs. HOA Special Assessments?

A special assessment tax is levied on taxpayers in order to fund local government projects and public improvements, like road construction or maintenance. Special assessment taxes are not related to HOA special assessments.

However, a homeowners association (HOA), which is formed by the owners of condominiums, townhouses or other properties, might also be subject to certain special assessments. Instead of a municipality, these HOA improvements are determined by the HOA board of directors and apply only to the members of that HOA.

Your HOA special assessments are outlined in your community’s governing documents, called HOA Covenants, Conditions and Restrictions (CC&Rs).

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What Is A Special Assessment Lien?

Your state or local government assigns a special tax in the form of a special assessment lien with a small interest rate to each home or property tax bill.

Before you buy a home, you must get an official assessment search or municipal lien request from your local government. Learn everything you can about the assessment roll. It’s possible to find an unpaid assessment on a property. For example, if a home changes owners since an assessment has been levied on a property, the new owners may not know about it.

Liens are legal tools used to protect the interest of local governments by ensuring that property owners pay their special assessments. When an entity has a lien, it holds a legal claim against a piece of property.

How Does The Special Assessment Tax Work?

A special assessment tax usually works like this:

1. A state or local government creates a resolution of intent for the project. This states the proposed improvement and the intended district.

2. A time and date for a public hearing are set and held. At the public hearing, the property tax rate is announced. Taxpayers will vote and can dispute the tax if they choose. Taxpayers can also get legal advice if necessary.

3. Taxes are collected. Special assessment taxes are collected for as long as the project is underway. Once the project is complete, the tax assessment ends. Homeowners who don't pay the tax could result in foreclosure proceedings on the lien.

Examples Of Special Assessment Taxes

Take a look at the following community projects that special assessment taxes can be used to fund:

  • System installations, such as water and sewer lines
  • Streets, roads and sidewalk paving
  • Infrastructure projects
  • Street lighting
  • Parking structures
  • Building construction projects
  • Public safety projects
  • Recreational projects, such as trails, skate parks, baseball fields and more
  • Other types of projects not listed

Special Assessment Tax: FAQs

Here are some frequently asked questions about special assessment taxes:

Are special assessment taxes deductible?

You may wonder if you can get a property tax deduction for special assessments.

The federal government allows property owners to deduct the cost of property taxes on federal income tax returns. That doesn't include special assessments, though. Special assessment taxes apply only to the special assessment districts.

However, a special assessment tax is deductible depending on the boundaries of the district. Maintenance, repairs or improvements are deductible, but any other purpose is nondeductible.

What is a special assessment district?

Regularly collected property taxes may not sufficiently fund a particular municipality, so a special assessment district forms. A special assessment district is set up for property owners to compensate the city or municipality for all expenses related to repairs or property improvements.

The assessed value of a home and the special assessment district directly interrelate because each homeowner pays a portion of the overall cost based on the assessed value of their property. Assessed value, which evaluates the fair market value of a property, is determined by an assessor.

What exemptions are there for special assessment taxes?

Special assessment taxes could increase the amount you pay in taxes. You could fit the criteria for property tax exemptions based on your age, disability or other factors. Consulting a local tax professional could help you lower your tax bill if you qualify.

The Bottom Line: A Special Assessment Tax Is Levied On Property Owners

A special assessment tax is levied on property owners to pay for projects that benefit the neighborhood's property. It’s unrelated to an HOA special assessment. If you’re planning to buy a house in the near future, research special assessments in real estate before you buy.

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Melissa Brock

Melissa Brock is a freelance writer and editor who writes about higher education, trading, investing, personal finance, cryptocurrency, mortgages and insurance. Melissa also writes SEO-driven blog copy for independent educational consultants and runs her website, College Money Tips, to help families navigate the college journey. She spent 12 years in the admission office at her alma mater.