If you ask many homeowners about their property taxes, they'll likely tell you they pay too much. Property taxes are real estate taxes calculated by local governments and paid by homeowners. They are considered ad valorem, which means they are assessed according to the value of your property. Since property values rise over time, so do property taxes. Even after you pay your mortgage, the property tax bills keep coming until you no longer own a home. What follows is a review of property tax bills and some ideas that may help you lower yours.
Key Takeaways
- Review your tax bill and look at comparable homes in your area for value discrepancies.
- Don't build or change your home just before an assessment; this may increase your property value.
- Walk through your home with the assessor to address all points affecting its assessed value.
- Look for local and state exemptions and consider appealing your property tax bill if you believe it's incorrect.
- Property taxes are calculated by multiplying your municipality's effective tax rate by the most recent assessment of your property's value.
Understanding Your Tax Bill
It's important to know how your municipality calculates your property taxes. Two neighboring towns may calculate them differently, which can be confusing for residents.
Property taxes are computed using two very important figures: the tax rate and the current market value of your property. A municipality sets its specific tax rate, also known as millage or mill rate, based on how much money it needs to pay for important services. State law determines how often the rate can be changed. Some states allow them to be altered annually, while others do so in different increments, such as every five years.
An assessor, hired by the local government, estimates your property's market value, including the land and structures. Then, you receive an assessment. In some jurisdictions, the assessed value is a percentage of the market value; in others, it is the same as the market value.
The assessor may visit your property or complete property assessments remotely using software with updated tax rolls. Next, based on this assessment, your local tax collector's office sends you your property tax bill.
To prepare your tax bill, your tax office multiplies the tax rate by the assessed value. So, if your property is assessed at $300,000 and your local government sets your tax rate at 2.5%, your annual tax bill is $7,500.
Property tax revenue is used to fund local projects and services such as fire departments, law enforcement, local public recreation, and education. Although these services benefit all residents, property taxes can be quite burdensome for some homeowners. Some states have more favorable property tax rates than others.
1. Ask for Your Property Tax Card
Few homeowners realize they can go down to the town or city hall and request a copy of their property tax cards from the local assessor's office. Many of these are now online. The tax card provides the homeowner with information the town has gathered about their propertyover time.
This card includes information about the lot's size, the rooms' precise dimensions, and the number and type of fixtures within the home. Other information included may be special features or any improvements to the existing structure.
As you review this card, note any discrepancies and raise these issues with the tax assessor. The assessor will either correct or conduct a re-evaluation. Though you might not think so, mistakes are common. If you find them, the township or city must correct them.
2. Don't Build
Any structural changes to a home or property will increase your tax bill. A deck, a pool, a large shed, or any other permanent fixture added to your home is presumed to increase its value.
Homeowners should investigate how much a new addition could increase their property tax bill before they begin construction. Call the local building and tax departments. They'll be able to give you a ballpark estimate of any changes.
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3. Limit Curb Appeal
Tax assessors are given a strict set of guidelines for their evaluations. However, the assessment still contains a certain amount of subjectivity. This means that more attractive homes often receive a higher assessed value than comparable houses that are less physically appealing.
Your property is compared with your neighbors and others in the general vicinity during the evaluation. While it may be difficult, resist the urge to primp your property before the assessor's arrival. You should be able to plan because the assessor normally schedules a visit in advance.
Make any physical improvements or cosmetic alterations to the home after the assessor finishes the evaluation.
4. Research Neighboring Homes
Information about your home is available at the local town or city hall. Frequently, information about other home assessments in the area is also available.
It is important to review comparable homes in the area and general statistics about the town's evaluation results. You may find discrepancies that could lower your taxes.
For example, let's say you have a four-bedroom home with a one-car garage, and your home is assessed at $250,000. Your neighbor also owns a four-bedroom home, but this house sports a two-car garage, a 150-square-foot shed, and a beautiful swimming pool. Despite this, your neighbor's home is valued at $235,000.
Was there a mistake? Unless your property has some other distinguishing characteristics that explain the discrepancy, the assessor probably made an error.
If you find an error, it pays to bring it to the assessor's attention as soon as possible so you can get a reassessment.
5. Allow the Assessor Access to Your Home
You do not have to bring the tax assessor into your home. However, if you don't, the assessor may assume that you've made certain improvements to the interior, such as new fixtures or expensive refurbishments. This could result in a bigger tax bill.
Many municipalities have a policy that if the homeowner does not grant full access to the property, the assessor will automatically assign the highest assessed value possible for that type of property—fair or not. At this point, it's up to the individual to dispute the evaluation, which will be nearly impossible unless you grant access to the interior.
The lesson: allow the assessor to access your home. (If you took out permits for all improvements that you've made to the property, the work you did shouldn't be a problem.)
6. Walk the Home With the Assessor
Many people allow the tax assessor to wander their homes unguided during the evaluation. This can be a mistake. Some assessors may only see the best parts of the home,such as the new fireplace or marble-topped counters in the kitchen. They may overlook the fact that several appliances are out of date or that cracks are visible in the ceiling.
To prevent this, be sure to walk the home with the assessor and point out the good points and deficiencies. This can help ensure you receive the fairest possible valuation for your home.
7. Look for Exemptions
You may qualify for an exemption if you fall into certain categories. Here are some demographic groups and property types for which states and municipalities might lower the tax burden:
- Older adults
- Veterans
- People with certain disabilities
- Agriculture properties
- Homestead exemptions
Check with your taxing authority to see if you qualify for an exemption and then apply for it.
8. Appeal Your Tax Bill
If you believe your bill should be lower but haven't gotten your tax assessment office to see things your way, don't fret. You still have an option available: appeal it.
If you decide to appeal, do so promptly; otherwise, you'll be stuck with the bill you receive from your local tax office.
Filing a tax appeal will probably cost you a small filing fee, which is paid to have someone review your appeal. Also, the tax appeal generally requires the help of a lawyer. Your attorney will charge you a fee—sometimes a part of your savings if your appeal is approved.
Your lawyer will review the steps of the appeal and what information is required. In some cases, you may need to take photos and provide details on the current condition of your property. The board will then review this information, compare it with the most recent assessment and tax bill, and decide. You may hear about it instantly, or a decision could take a few months.
If the board approves your appeal, it will only lower your home's assessment value, not your effective tax rate. That's enough to lower your tax bill. Remember, though, that the appeal does not guarantee that your bill will drop. It may remain the same or, in rare cases, may increase if the reviewer feels your assessment is too low.
At What Age Do You Stop Paying Property Taxes?
You'll owe property taxes as long as you own a home. However, state programs can provide certain individuals, such as older adults, with property tax relief if they meet the criteria. Check with your state or municipality for more information.
What Is a Homestead Tax Exemption?
It's an exemption that reduces your property's assessment value and therefore your property tax bill. It applies only to a primary residence.
What If My Property Tax Bill Is Wrong?
If you think it's incorrect, contact your local tax authority immediately with the reasons for your belief. With that information, office personnel can then double-check on your property's assessed value, any applicable exemptions that weren't accounted for, and that the correct tax rate and calculation were used.
The Bottom Line
It can be hard to balance the desire for a beautiful home with the desire to pay as little tax as possible. However, there are some things you can do to reduce your property tax burden without resorting to living in only the lowest-value homes.
Avoid making any improvements right before your house is because of be assessed. Check out the neighbors—ifthey pay less tax than you but own a similar home, you may be in line for a tax reduction.
The most important thing to remember is don't assume tax bills are always correct. A little homework and due diligence can help reduce and make more manageable what can be a distinct tax burden for certain homeowners.
