In 1973, the NJ Legislature adopted a formula known as Chapter 123 to test the fairness of an assessment. Once the Tax Board determines a property’s true market value during an appeal, they are required to compare true market value to taxable assessed value.
The range of acceptable tolerance to actual value is +/-15% of True Market Value. That means an assessment can be over or under assessed by 15% and still be considered correct.
Check out your municipalities "Common Level Ranges" (Chapter 123)
If the ratio of assessed value to true value exceeds the average ratio by 15%, the assessment is reduced to the common level.
- Example
Director’s Ratio = 85%
Common Level Range = 72.25%-97.75% True Value = $95000
Assessment = $94000
Ratio = 98.95% ($94000÷$95000)
Judgment = Reduction in assessed value New Assessment = $80750 ($95000 x 85%)
However, if the assessment falls within this common level range, no adjustment is made.
If the assessed value to true value ratio falls below the common level, the Tax Board must increase the assessment to the common level.
Example
Director’s Ratio = 85%
Common Level Range = 72.25%-97.75% True Value = $95000
Assessment = $90000
Ratio = 94.74% ($90000÷$95000) Judgment = No change in assessed value
If the assessed value to true value ratio falls below the common level, the Tax Board must increase the assessment to the common level.
Example
Director’s Ratio = 85%
Common Level Range = 72.25%-97.75% True Value = $95000
Assessment = $67000
Ratio = 70.53% ($67000÷$95000)
Judgment = Increase in assessed value New Assessment = $80750 ($95000 x 85%)
Source: NJ Division of Taxation
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