While I tend to be straight-laced when it comes to taxes, I also think it is our right – heck, even our duty – to pay as little taxes as legally required. I take every deduction that I can substantiate. While learning about property taxes, I read that somewhere between 30-60% of homes in many areas are over-assessed. If the estimated assessment value is too high, then those homeowners are paying too much in taxes! In areas of dropping home values, you may be able to get your assessment lowered.
But don’t expect anybody to tell you this. From this 2000 and 2004 articles about property taxes, both from CNN Money:
“It’s an unfair system,” Lewis said. “You can go to one particular block in Long Island, for example, where 11 houses got a tax reduction last year because they filed grievances. The remaining 4 homeowners who didn’t file a grievance are still overpaying. In most municipalities, if you don’t file it means you accept the assessment value of your home.”
“The bottom line is that if homeowners aren’t focused on what has happened in their marketplace, they are paying too much in property tax,” says John Brusniak, a Dallas property tax lawyer.
My sister-in-law recently contested her assessment and successfully got a reduction in her property taxes. The way to do it seems to be for (1) each homeowner to do a little research as to how their local government does their property taxes, (2) figure out if they are over-assessed, and then (3) file an appropriate appeal if necessary.
How Are Assessments Calculated?
This varies between states and even counties, but it could be based on:
- the sales of comparable homes in your neighborhood,
- the replacement value of your home, or how much it would cost to build your home from scratch at current material and labor costs,
- a multiplier of how much rental income your property would produce,
- or the most recent purchase price, plus an inflation adjustment.
You can usually find an assessment report at the tax collector’s office showing you how they got their number. Now you have to reverse engineer things to figure out how you can argue it back down. For example, you might have comparables with lower prices, or they might have marked down your square footage or other details wrong. Use sites like Zillow or Domania as well, since they can be based on tax records. Ideally, you’ll find a house just like yours, but with a lower assessment value.
The Appeals Process
Check out your local state website. If you live in California, there is this Guide to Residential Property Assessment Appeals. In New York, they have a Guide to Fair Assessments For Property Owners.
After looking at a few examples, some places seem to have a written form you can fill out first (an informal review). From this SF Chronicle article:
If your home is worth less than you paid, chances are you also can get a temporary reduction in your property taxes – without a battery of lawyers or dubious arguments about functional obsolescence. Just ask your county assessor for an informal review of your assessed value. It’s free and easy to do yourself. […] In most counties, you can simply call or write your assessor’s office or download a form from its Web site and mail it in.
If that fails, then you might have to perform a formal appeal which involves meeting with officials and assessors face-to-face. It doesn’t seem all that complicated, besides building up your evidence the most important thing to have is persistence. Hurray for bureaucracy!
p.s. If you’re selling your home, consider that a lower assessment (and thus a lower tax bill for the new owner) can help you sell your home faster or even for a higher price.
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I live in north Alabama and we’ve been stuck with annual reappraisals of our home worth each year apparently. I bought a house and used the purchase price as proof of lower value for 2 years in a row to keep my property tax down. Was easy to do, just took the deed with the price on it to the tax office. Still a hassle, but I pay lower tax, so was worth it to me. They wanted to say my house was to be taxed at about $20,000+ higher value!!
FYI – don’t mistake an Appraisal for an Assessment
Do your research into the town/city’s assessment process and DO not take an bank / mortgage appraiser’s estimate to city hall. I was trying to refinance and received an up to date appraisal based on 2007 recent sales (3 comparable properties as selected by the bank’s appraiser mind you) of $ 440K. My tax assessment was reported as $510K so I thought I should appeal this tax assessment
So off I go to appeal the tax rate – woe is me as the city assesses on trailing 16 month window for all sales and factors in depreciated value/home improvements etc… So the assessor reviewed our case and determined that are assessment is a bit low for our property. So my taxes may go up a little next year!
This particularly important point is also overlooked: taxes never go down, and property taxes never go away. Anything you can do to dispute the tax findings and shelter yourself does you a huge favor. You do yourself a disservice if you don’t appeal your taxes, since every time they assess your home, your taxes will rise by some amount, even if the market value of your home declines. The government, for all the talk about the housing slump, exacerbates the problem in many instances by leaving easements at the highest rate. I wonder how many people lost their homes for being in arrears on taxes (which is normally part of their mortgage payment), and found new people owned the note/deed through a tax sale. The government wants to be paid first.
So, assume the following scenario:
Your taxes rise 0.25% every year for 10 years from 1%, meaning that you eventually pay 3.5% of your homes value at the end point. Presumably, your home value rises, meaning your total tax liability rises to far more than 3.5% of the original mortgage payment, sort of like a miniscule ballooning ARM…
If you can argue down from a 0.25% increase to a 0.2% annual increase, the final rate of assessment in the same period is 3%, or the equivalent of having no increase every seven years.
Just some numbers for thought. It’s not that simple, but I love math. Maybe I’ll get some real figures and do a real illustration.
Condos especially can be wildly over assessed and under assessed for that matter. Cities because of they are unable to individually look at properties rely on formulas. Properties can vary widely even in small neighborhood in the city, and these formulas often become out of line.
Yeah, this was a big deal here in Wake county (Raleigh, NC) last year. on the flip side, for 3 years I was paying taxes on an assessment that was 100K below market value. So paying taxes on market value now doesn’t really hurt my feelings. 🙂
Where this can really benefit you is if you live in an area that has seen rapid decline in prices. My area has remained steady, with slight growth. But others have seen %25 declines. If I lived in any of those areas, I’d be contesting my property tax valuation post haste.
Great post on how you can appeal your property taxes. So often we sit back and let fees and taxes go unquestioned. Many times, it is worth the effort to double check the amount of money you are paying.
I second this post. Late in 2007 my house value was reassessed much higher. While doing research to appeal, I discovered the county does not use your engineered house plans that are on file with the county to determine square footage. Instead, they do some crude measurements based on your house footprint (some measured from photographs!). It turns out the square footage of my house was set to almost 1,000 square feet too high.
I not only won the appeal and thus reduced my property tax by almost $500 a year, but I got a refund for all prior years of overpaying. It took about 30 minutes in phone calls but it was time well spent.
One “gotcha” when attempting to re-assess your house is that many municipalities’ assessments are for a year in arrears. That means that your assessment is based on your home’s value last year, not the current year. This is intentional. Towns have to do this so that they can adequately plan their budgets/tax rates.
So, you might not get much of an adjustment if you file a grievance this year, but next year, after the “housing crash” has had some time to sink in, you might have more luck.
Office buildings and the like actually have a budget for this kind of thing. I’ve seen it take estimates down some $10k (but then it was a big building).
the way to lower property taxes is to buy cheaper homes 😛
Very seldom do I see something Ive never heard of before…and this is one of those times. Id be curious to talk to people who have tried it.
as a homeowner, you should get letters from attorneys all over promising you to lower your taxes. Their fee is a portion of the reduced fee. This mai usually comes around the time you pay those taxes.
My latest assessment was done last year before I owned the house. Can I still contest it?
In the San Diego are property value has decreased approximately 24% since 2006. Just this week (after sending a form to my County Tax Collector’s office) I received notice that a check is due to me in the amount of $3,600 for over payments during the last 3 years.
Rachel.
That is interesting. I just got my notice that my appeal that I applied for back in November was approved and that my property value for 2008 is lowered $80,000 here in San Diego. It did not say anything about a refund for the amount I already paid. Did you have to request the refund or did they just do it on their own? an advice is appreciated.
Property tax mailings are in the mail within the Pierce county area. I’m a real estate professional located in Tacoma, WA with nearly a decade of residential experience. If you’re located within Pierce county and believe that your property tax assessment is too high, I may be able to help you. Send me an email via my web page at http://www.lafreniere.mywindermere.com. Include your contact information complete with name, address, phone, and we can discuss a possible solution.