When it comes to new construction homes, figuring out property taxes can feel like a bit of a guessing game. While we can’t offer a precise formula (and trust us—we’ve asked local tax officials), we can help shed light on how property taxes are typically assessed and what you can expect.
How Property Taxes Work in TN & MS
Every home in Tennessee and Mississippi is assigned a “tax appraised value” made up of two components:
- Land value
- Improvements value (i.e., the structure/home itself)
For existing homes, local tax assessors are required to reassess the tax appraised value every four years (or every six years in certain parts of Tennessee).
What About New Construction Homes?
Here’s where things get a little tricky. New construction homes don’t usually have an “improvements” value assigned right when they’re completed. That portion of the appraisal often isn’t added until the following January. However, assessors do have the authority to assign a value earlier—typically once a Certificate of Occupancy is issued.
✅ Why this matters to buyers:
In many cases, you may only pay taxes on the land value for the remainder of the calendar year in which you purchased the home—potentially saving you money upfront.
So How Are These Values Calculated?
There’s no official, consistent formula—something we’ve confirmed directly with tax offices. However, we’ve noticed reliable patterns over time.
In our experience, the tax appraised value for new construction homes is typically 55% to 70% of the estimated market value.
Example:
A home in the Nicole Place subdivision of Horn Lake, MS (2,226 sq. ft.) has an estimated market value of $345,000 based on local comps. Its tax appraised value? $193,263—which is about 56% of its market value.
[Click here to view this real-world example.]
In Horn Lake, and especially in Nicole Place, we commonly estimate the tax appraised value using 55% to 65% of the purchase price.
How to Estimate Your Property Tax
Once you have an estimated tax appraised value, you can calculate the property taxes using the local rate.
Here’s how:
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Use this [tax calculator link].
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Select: “NO Homestead Exemption – 15% Assessment” (for investment properties).
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Enter the estimated tax appraised value.
Example:
With a tax appraised value of $193,263, the annual property taxes for a non-owner-occupied property in Horn Lake come out to $4,289.85.
A Common Mistake: Lenders Overestimating
When purchasing a property with financing, it’s common for lenders to use the full sales price as the tax appraised value when calculating escrows. This can overinflate projected property taxes and lead to higher monthly impound payments than those shown in your Meridian pro forma.
If this happens, know that you have options. You can appeal the assessment by submitting comparables from nearby properties that support a lower valuation. While this rarely has been an issue for our Meridian investors, it’s reassuring to know the option exists.
