Key terms and definitions for understanding New Jersey property taxes.
- ADP (Annual Demonstration Program)
- A New Jersey program (P.L. 2013, c. 15) allowing municipalities to conduct annual reassessments instead of periodic revaluations. Pioneered in Monmouth County.
- Annual Reassessment
- The process of updating property assessments every year to reflect current market values. Contrast with periodic revaluation (every 5-10+ years).
- Average Ratio (Director's Ratio)
- The ratio representing the average relationship between assessed values and true market values in a district, calculated from sales data by the NJ Division of Taxation.
- Chapter 123
- N.J.S.A. 54:51A-6, the law establishing the common level range and rules for property tax appeals based on assessment ratios. Provides the legal framework for the ±15% corridor.
- COD (Coefficient of Dispersion)
- A measure of assessment uniformity. Lower COD indicates more uniform assessments. Typically expressed as a percentage; IAAO standard is COD <15% for residential.
- Common Level Range (Corridor)
- The range within which an assessment is considered acceptable: from 85% to 115% of the Director's average ratio (±15%). Properties assessed within this range cannot successfully appeal based solely on the ratio.
- Director's Ratio
- See "Average Ratio." The ratio calculated and published by the NJ Division of Taxation Director.
- Drift
- The gradual divergence of the average ratio from 100% as market values change but assessments remain frozen. Leads to narrowing of the corridor.
- 87% Cliff
- The threshold (100 ÷ 1.15 ≈ 86.96%) below which the average ratio causes properties assessed at 100% to fall outside the upper limit of the corridor, exposing them to Chapter 123 appeals.
- Freeze Act (Senior Freeze)
- The Property Tax Reimbursement Program (N.J.S.A. 54:3-26, 54:51A-8) that reimburses eligible seniors and disabled residents for property tax increases. Protections fully apply in ADP municipalities.
- Levy
- The total amount of property tax to be collected by a taxing district for a given year. Set by municipal, school, and county budgets. The levy is divided among property owners based on their share of total ratables.
- PRD (Price-Related Differential)
- A measure of vertical equity in assessments. A PRD of 1.00 indicates no systematic bias between high-value and low-value properties. Values significantly above 1.00 suggest regressivity.
- Ratables
- The total assessed value of all taxable property in a district. Your "share" of the levy equals your assessed value divided by total ratables.
- Revaluation
- A comprehensive reassessment of all properties in a district, typically required every 10 years or when the average ratio drifts significantly. Costs approximately $140-170/parcel.
- Share
- A property's portion of the total tax levy, calculated as: Assessment ÷ Total Ratables. This determines what percentage of the total levy you pay.
- Tax Rate
- The amount of tax per $100 of assessed value. Calculated as: (Levy ÷ Total Ratables) × 100. This is the rate applied to your assessment to determine your tax bill.
- True Value (Market Value)
- The estimated price a property would sell for in an arm's-length transaction on the open market. Assessments should ideally equal true value (100% ratio).