The Property Valuation Administrator (PVA) is the local official responsible for assessing most real property in the county. All real property is subject to being revalued every year and all real property parcels must be physically inspected by the PVA office no less than once every four years.
Kentucky law recognizes the validity of a variety of valuation methods. See
KRS 132.191. However, the three most common methods used by PVAs and the Office of Property Valuation (OPV) to determine the estimated fair cash value of a property are:
- the sales comparison approach,
- the cost approach, and
- the income approach.
Each of these methods is explained in the following sections.
Sales Comparison Approach
sales comparison approach – also known as the "market approach" – is a method for predicting the value of a property based on a direct comparison of recently sold similar properties. This approach is typically used by a PVA to estimate the value of residential properties. Sales of homes that sold in areas near where you live are used as a starting point to come up with a value for your home. Adjustments – both positive and negative – are made for differences between the homes that sold and your house, before a final estimate of value is determined for your property. For example, if the property that sold has a basement and your house does not, then the sale price would be adjusted downward when determining the assessed value of your home. Your PVA should be able to provide you with a list of the various home sales that were used to determine the assessed value of your residential property.
cost approach starts with the estimated amount it would cost the property owner to replace a building or other improvement made to the property and then reduces that amount for the estimated amount of depreciation that has occurred.
Although the sales comparison approach would likely be used to value homes on farm properties, the barns, fencing and other improvements located on the farm property will be valued based upon the cost approach. If a barn would cost $25,000 if it had to be replaced by the property owner, but it is estimated that the barn has depreciated by 30%, then the value determined by the cost approach for the barn would be $17,500 ($25,000 - $7,500). A property's depreciation is determined by the age of the improvements and how well the improvements have been maintained by the property owner.
Just as the cost approach is used to value farm improvements, it is also used to value various commercial and industrial properties. The same basic principles apply: the PVA first estimates the cost to replace the commercial building and then makes a reduction for the estimated depreciation the building has experienced. The market value of the land upon which the building sits is then added to the improvement value to arrive at the property's total assessment.
Commercial properties that generate income – such as an apartment complex – are usually valued using the income approach. This approach is based upon the theory that the current market value of the property is equal to the present worth of the income the property can be expected to produce during its useful life. The PVA will make adjustments to the gross income generated by the property to account for vacancies and operating expenses and the resulting net income total is capitalized by the expected rate of return the owner will receive from the property. If a property's income after the appropriate adjustments is $50,000 and the expected return on the property is 10%, then the property's estimated value would be $500,000 ($50,000 /.10). When this approach is used, the PVA will usually need to work with the property owner to obtain an accurate record of the income generated, all applicable expenses, and a reasonable rate of return for that type of property will need to be determined. As with the cost approach, the value of the land will be added to the estimated value of the improvement to arrive at the total assessed value for the property.
Special Assessment Procedure for Farm Land
Farm land is assessed at its agricultural value instead of its market value. This is authorized by Section 172A of Kentucky's Constitution and is designed to preserve farmland – especially in more urban areas that are experiencing rapid development. OPV obtains rental information for land used for crops and pasture. This information is then utilized to develop various per acre values for the different classifications of agricultural land—prime cropland, cropland, pasture, woodlands, and waste areas—for different regions of the state. This can result is substantial tax savings for a farm property owner. If the market value for an acre of property is $50,000 in your area and the agricultural value of that same acre is $750, the farm owner's property taxes would be based on the lower per acre value. This type of difference in value is typical in the more urban areas of Kentucky. In more rural areas, the market value and agricultural values of farmland would tend to be closer together.
Click here to access the current farm agricultural guidelines that have been issued to all PVAs.
Property Exempt from Taxation
Sections 170 and 171 of the Kentucky Constitution identify several types of property that are exempt from ad valorem property taxation in Kentucky. These exemptions are administratively categorized into the following classifications:
- Federally owned property;
- State owned property;
- County owned property;
- City owned property;
- Property owned by a non-profit institution of education;
- Personal property owned and real property owned and occupied by an institution of religion;
- Homestead and disability exemptions;
- Cemeteries and property owned by purely public charities.
If an entity believes it should be exempt from paying property taxes, there is an application process that can be followed. An application, Revenue Form 62A023, can be completed and submitted to the local PVA office. Most applications will be reviewed and approved or denied by the PVA. However, if the application involves a novel set of facts or a more complicated application of Kentucky Constitutional law, the PVA should forward the application to OPV, which will review the application and make a recommendation to the PVA. Either way, the PVA will send a final letter of determination to the taxpayer.
If a taxpayer's application is denied they may appeal the decision to the local board of assessment appeals. The local board must then apply to the Department of Revenue for a formal, written opinion as to the applicability of the claimed exception pursuant to Section 170 of the Kentucky Constitution. The local board must follow the Department's written advice concerning the tax exemption status of the property, but the local board still has the responsibility for determining the fair cash value of the property. See
The Homestead exemption applies to any real property owned and maintained as the permanent residence of a taxpayer who is sixty-five years of age or older. For property owned by a married couple, the property may qualify for the exemption as long as either spouse is at least sixty-five years old. However, only one exemption is allowed per household, even if both spouses meet the age requirement. Once an application has been filed and accepted, the application is good for subsequent years as long as the original applicant owns and lives on the property. If the property is sold, the new owner must apply for the exemption, if eligible. In other words, the exemption is tied to the owner, not to the property.
The Homestead exemption is also extended to anyone who is totally disabled under a program authorized or administered by an agency of the United States Government or any retirement system either within or without the Commonwealth of Kentucky. To qualify, the applicant must have maintained the disability classification for the entirety of the particular taxation period, must have received disability payments under this classification, and must submit verification documentation before December 31.
Most taxpayers who qualify for a homestead exemption due to their total disability will only need to file an application one time. KRS 132.810 exempts "service-connected totally disabled veterans of the United States Armed Forces" from the yearly filing requirement. Therefore, after the initial application process for a totally disabled veteran has been filed and approved, it will not be necessary for that property owner to reapply for the exemption in subsequent years. Permanently disabled individuals who are determined to be disabled under the applicable rules of the Social Security Administration, the applicable rules of the Kentucky Retirement System, or any other provision of the Kentucky Revised Statutes are also exempted from the annual filing requirement. Only taxpayers who have been classified as totally disabled by a state or local agency outside of Kentucky must continue to file an application each year in order to receive the disability exemption.
Form 62A350 is used for both the age exemption and the disability exemption. These forms must be kept on file in the PVA office. Approval does not exempt the entire value of the property from taxation; only the amount approved by the Department of Revenue may be deducted from the assessed value of the property. This amount is adjusted every two years, as required by law, to account for changes in the purchasing power of the dollar. The exemption has increased from $6,500 in 1972 to $39,300 for the 2019 and 2020 property tax assessment periods (KRS 132.810).
Homestead Exemption Application, Form 62A350