Diving into Special Assessment Tax: What It Is, Who Pays It, and An Example You Should Know!

When you own a home or land, you’re usually aware of regular property taxes. But what happens when the city needs to build new sidewalks or fix sewer lines in your area? That’s where special assessment tax comes in. While it might sound like a confusing government term, it’s actually pretty straightforward once you break it down.

In this article, we’ll walk you through what a special assessment tax is, how it works, who pays it, and why it matters for every property owner. We’ll also look at real-life examples and help you understand how these taxes show up on your property tax bill.

What Is a Special Assessment Tax?

A special assessment tax is an extra fee from your city or town to fund public developments that will benefit individual properties in some way. Some examples include installing street lights, constructing sidewalks, repairing sewer mains, and upgrading sewer and water systems.

Unlike ad valorem taxes (based on property value), a special assessment is typically spread among the property holders in the area being improved. It’s one way cities or towns can finance significant improvement costs without taxing everyone more.

For instance, if the city introduces new sewer hook-ups in your area, they may charge each piece of property (each home or plot) that will receive the benefit of the project. You may notice an added charge on your tax bill – this is called a special assessment.

Examples of Special Assessment Tax

Suppose the neighborhood is experiencing flooding problems and the city decides to put in a new sewer system. They don’t tax everyone in general to do it – instead, they charge a special assessment on the homes that will be benefited by the improved drainage.

Here are some common examples:

• New or upgraded sewer lines
• Street lighting installations
• Sidewalk construction or repair
• Water and sewer system improvements
• Road paving or repaving

In each case, only the property owners in the area where the work is done will have to pay for it.

The Special Assessment District

To obtain this tax equitably, cities usually establish a special assessment district. It is an area in which property holders will receive improvements and in exchange be required to contribute towards them.

For instance, a special assessment district could consist of one block, one little neighborhood, or several streets on which there are going to be road upgrades or street lighting installed by the local government.

Only the property owners within this zone must make the special assessment tax payment, since through these upgrades, they are directly benefiting.

Types of Special Assessment

There are different kinds of special assessments, depending on who is charging them and what the money will be used for. Let’s look at the two main types:

HOA Special Assessment

If you reside in an area with a homeowners association (HOA), your HOA may impose a special assessment when they require more funds than under normal circumstances – such as repairing a pool or fixing communal buildings.

They are distinct from property tax, and the homeowner most commonly pays them directly to the HOA. If your usual HOA costs are not adequate to fund extensive repairs or unexpected crises, that is when a special assessment will come into play.