Rising home values give, and they taketh away. It’s a double-edged sword homeowners face at the end of the year with fluctuating real estate costs.
On the one hand, you’re happy the value of your home has gone up a few zeros. A higher value means a higher asking price if you’re of the mind to sell your home. And if you’re looking to refinance to lower your mortgage, the value of your home can set you up to save money.
So how do you navigate the rocky seas of your property tax bill? By the end of this post, if you’re a current homeowner, you’ll learn some tips and tricks to slash your yearly property taxes.
If you’re looking for information while considering homeownership, this post will help you understand what property taxes are and how you can offset the cost from the start.
Let’s dive in.
I | Understanding Property Tax
What are property taxes?
Property tax is a tax levied on the value of a property, including land. It’s an ad valorem tax, meaning its amount depends on the property’s value.
Some jurisdictions include the value of your personal property in calculating your property‘s value.
Your bill is decided by the assessed value of your property, exemptions if you qualify for any, and local property tax rate.
Local government bodies set the tax rate for their jurisdiction, and these taxes are often the primary source of their revenue.
Revenue generated from property tax goes into public and community improvements and infrastructure. These areas include libraries, sewer and water system modifications, road works, paying first responders, and other services that benefit the community.
What is a property tax assessment?
Assessors carry out a property assessment before calculating your tax bill. Despite popular belief, assessors do not set the tax you pay. Their role starts and ends with only half of the property value equation.
Several factors add up in the determination of your property valuation:
- The size and age;
- Location (county, state, school district, special districts like fire and solid water districts, etc.);
- Use (primary residence, rental, agricultural, apartment, office, vacant lot, etc.);
- Construction type of your home and any additional permanent structures you may have, like a backyard shed;
- Landscaping (lawn, water features, hardscapes, etc.).
Like your local tax rate, the formula used to calculate a property‘s value varies across jurisdictions. In some areas, the assessed value solely reflects the market price. While in others, the market value is further multiplied by an assessment rate.
Low tax rates offset high market values. In the same instance where low rates make up for increased market value, high rates raise the tax dollar for low market value properties. Compare the market value ratio versus tax rate when deciding where to live.
Know the schedule for tax assessments in your chosen jurisdiction and prepare yourself beforehand. Reviews may occur annually, every other year, only at the transfer of a property or whatever predetermined timetable your local assessors choose.
Strange as this may sound, try not to carry out any refurbishing close to the time. Home improvements increase your property value.
While undergoing assessment, ask if you are eligible for any exemptions. These exemptions can lower your tax bill considerably if you qualify. You can file an appeal if you do not qualify for any tax exemptions and think your statement is too high. This appeal is for modifying your property value, not the tax rate applied.
II | 6 Steps to Lower Your Property Taxes
Steps you can take before appealing your property tax bill.
1. Review Your Property Tax Card
Before heading into an appeal, request a copy of your property card. It’s the official record of your property, highlighting your home‘s assessed value, measurements, the number of rooms you have, etc. All the information assessors gather to calculate the value of your home.
Apply to your county assessor’s office for a copy of your tax card. Do a thorough review and ensure all the information noted is correct. Does it list more rooms than you have in your home? Is the square footage accurate, along with the year of construction?
Consider the changes you’ve made since your previous evaluation. When last you were assessed, did you have a shed in your backyard, but you’ve since demolished it? Did you remove any hardscape (water features, arbors, etc.) and want your taxes adjusted accordingly?
Raise all discrepancies with the assessor and request a reevaluation of your taxes.
2. Apply for Property Tax Relief
Many states offer a tax freeze option for veterans, seniors, and the disabled. You can freeze your property tax at its current rate if you are eligible. Eligibility, however, differs from state to state. Check your local tax department to determine if you qualify for a tax freeze.
Properties used for agricultural purposes may also qualify for tax benefits.
Tax reductions are not automatically applied. Unless you ask and say, “Hey, I’m qualified, here’s proof,” don’t expect a tax break. So with that in mind, be proactive. Call your local assessor’s office to determine if you qualify for any tax relief programs.
3. Be a Conscious Builder
Whatever structural changes you make to your property will increase your tax bill.
Before you add that new deck or start excavations for a new swimming pool, consider how much value these changes will add to your home. The math goes: the higher the value of your home, the higher your property tax.
Put in a call to your local tax or building department and request information. They’ll be able to provide you with an estimate. Please note it’s an estimate because the price you receive in January may be higher or lower than the price given in September when the county tax assessor knocks at your gate. Real estate is a fluctuating market.
And I’m not saying “don’t build,” but research the possible impact of adding any permanent fixture to your property if you decide to.
4. Allow the Assessor Into Your Home
By law, you can refuse the tax assessor access to your home. It’s an option, but not an advised one. Though you may decide not to let a stranger into your home for privacy reasons, it may raise other questions. Like if you’re hiding any new improvements. And worst yet, did you get the required permits for them?
Don’t leave your county assessor with any suspicion that you may be up to something shady. Assumptions and doubts can be costly. Some state policies allow for the assigning of the highest possible price upon the denial of full access.
Allowing the assessor into your home shouldn’t be a problem if you’ve done nothing wrong. If you’re concerned about your safety, have a family member or friend with you at the assessment time.
Walk with the assessor room to room and be upfront about modifications. If any defects are not readily visible, point them out as well.
5. Compare Homes in Your Neighborhood
Neighbors set the bar for your evaluation. In other words, assessors add some subjectivity to the strict set of guides they have to follow. The more your house stands out from those around you and your general vicinity, the higher the perceived value.
The good news is that you can counter some of the “subjective” pricing with research. Many homeowners don’t know that property tax bills are public information.
Grab a few reports on your neighbors. Request the records of comparable homes in your area. Select homes roughly the same based on square footage, number of rooms, garage size, etc. If your home is valued much higher, then you have a solid ground for appeal.
6. Reassessment
Don’t assume that all assessors keep up with trends in the current market. According to the National Taxpayers Union Foundation (NTUF), up to 60% of properties are overvalued. Overvaluation leads to a higher tax bill, a reality that most affects middle and lower-income taxpayers.
You also have the option of hiring an independent appraiser.
Despite the possibility of slashing thousands of dollars off their taxes, fewer than 5% of qualified homeowners appeal their assessment.
Your county assessor’s evaluation isn’t final. You can appeal for tax savings. Here’s how.
Prepare
Visit your local tax office to learn about the tax appeal process in your area. Note the required paperwork and filing deadline. Most assessors grant a window in which you can appeal your tax reevaluation after you’ve received your initial bill by mail. This grace period is sometimes 30 days, maybe more or less.
If you miss the timeframe, you’re stuck with the revised bill until the following year.
Ensure you meet all of the basic requirements. Being prepared and armed with evidence in your appeal goes a long way in your favor. Ensure the basis of your request is valid, supported, and well thought out before facing the appeals board.
Beware
Though it pays to reassess your property tax dollar with the changing prices on the real estate market, be conscious of possible repercussions.
You open yourself to added scrutiny when you question the assessor’s results. You’re trying to prove they’re wrong, and they’re trying to prove they’re right. Read your local property statutes as part of your pre-appeal research.
If parts of your property aren’t up to code, it may all come to light during the reassessment and unleash a torrent of other problems.
Then there is the matter of improvement projects. If you’ve undergone any home improvements since your last evaluation and you end up appealing, you could be increasing rather than reducing your taxes. If you do not have the requisite permits, that is another situation entirely.
Appeal responsibly. It could backfire in significant ways.
The National Taxpayers Union Foundation (NTUF) states that most applicants who file an appeal win. All the same, it pays to be prepared. Don’t be afraid to seek help from your local tax office and ask questions if you don’t understand something.
Conclusion
No one wants to pay more taxes, but sadly, it does happen. Tax assessors can and do sometimes get it wrong. To eliminate yourself from the millions affected, take the following steps:
- Check your property card for discrepancies.
- If all the information on your property card is correct and your property taxes have you singing the blues, research tax relief options. If you qualify, bring it to the attention of your local assessor.
- Be mindful of the renovation you carry out, calculating the possible effects on your property tax bill beforehand. Also, ensure you apply and receive all necessary permits. You don’t want to compound or create any legal issues for yourself.
- Allow the tax assessor into your home in good faith for transparency. It’s best not to hide any remodeling. Any suspicion on your part will lead to more considerable penalties and eliminate potential savings.
- Before you take the final step to file for an appeal, check the bills of comparable homes. If you discover you’re paying much higher than homes similar to yours, this evidence can strengthen your argument in a property tax appeal.
- Be prepared with all the necessary information and documentation when facing the appeals board. Reassessment has a high success rate for those filing solid claims.
- If you have the budget, you can pay for an independent appraisal.
