How would you like to put several hundred dollars in your pocket this year, and every year after that? It's possible, if your real estate taxes are too high and you get them reassessed.
Thousands of taxpayers win appeals of their property tax bills every year, and in some areas about 50% of those who appeal their taxes win lower assessments. Some experts estimate that 60% of taxable property in the United States is over assessed, so the odds are high that you are paying higher tax bills than you should. Despite these odds, only about one taxpayer in fifty challenges their assessment.
If you challenge your assessment, you may not only cut your property tax by hundreds or thousands of dollars, but will do so for many years to come. And you may be pleasantly surprised at how little time it takes to accomplish this.
Please understand that it is necessary to speak in generalities here. Each state, and often different jurisdictions within a state, have different systems for tax assessments and appeals. We can provide general principles and guidance as to how to proceed and where to look, but you will have to invest the time to learn the particular idiosyncrasies of your jurisdiction. Per hour, this time investment may be one of the best you ever make.
Generally each locality in the country assesses property taxes. In addition to those that actually do assessments, there may be other taxing jurisdictions that use the same assessment figures. For example, your tax bill may actually be a combined billing on behalf of several overlapping jurisdictions, with each showing as one line of the bill. One of the most common is an independent school board, but there may also be special improvement districts, water districts, sewer districts, library boards, fire districts, soil & water conservation districts, and/or community college districts that use a combined billing statement based on that one assessment. That means there are tens of thousands of taxing jurisdictions, and your one assessment may affect the amount you pay to half a dozen different taxing entities.
There are often errors in assessments. All you have to do is find out what's wrong.
Most residential properties are assessed at market value, and then the tax is assessed at a value that is less than market value. For example, your local tax rate might be applied against 75% of your market value. So don't be fooled into thinking your home is underassessed when the tax rate is applied against 80% of what you know the market value is. You could be overassessed and not know it. These fractional assessments create confusion and trick owners into not appealing because they believe they are getting a "break." Don't be fooled. Look at the comparable properties. If your home is assessed higher than comparable properties -- regardless of the fact that it is at a fraction of the market value -- then you have a case that you can win.
To see if you have an improper assessment, you have to examine your property card. You might have to make an appointment to do this, or you could show up at the office during regular hours. The policies vary widely, but usually you have a legal right to inspect the records. They are public records -- open to inspection by anyone -- nobody is doing you a favor to let you look at them.
Many errors can be found on the property card, so read it carefully. Make sure the description of your property is absolutely accurate, and double check the arithmetic. Especially for things like square footage -- of both the home and the lot.
Errors on property cards are common. There might be the wrong land or building dimensions, or descriptions of the building could be inaccurate. The nature and quality of improvements can be misstated or just plain wrong. Also be sure that any negative influences on your property are recorded. Perhaps there is an easement that's not on the card, or there is some other factor that detracts from the property's value that is not on the card.
You also want to look at your neighbors' property cards. That's because assessments must be fair or equal between similar properties. If your neighbors have similar homes but lower assessments, you have grounds for an appeal.
However, the fastest and easiest rewards will come just from checking for errors on your own assessment card. These are generally the simplest to correct as well. The assessor's office will usually informally and readily correct an obvious error. This type of error can usually be cleared up in an informal discussion accompanied by appropriate proof such as photos, a current appraiser's report, or a copy of the latest survey.
After examining the cards, be sure that your assessment is not illegally high. The market value should be properly determined, and the assessment value also must be correctly computed. Then the tax rate must be correctly applied to the assessed value.
When residential properties are involved, you generally determine market value by examining the value of comparable properties. Recent sales prices of similar homes or even asking prices of similar houses are acceptable in most areas. The properties must be in the same general area, about the same age, the same design, and have improvements that are similar to yours. Owners, real estate agents, mortgage lenders, or even the assessor's property cards can lead you to comparable properties. Many newspapers now publish the terms of recent home sales, so this can be a good source. You might also check the deed transfer records at the local courthouse.
The larger number of comparable properties on your list the better. What you need to establish is that your property is out of line with assessments generally in the same taxing district. Showing that it is out of line with two or three neighboring properties may establish nothing except that they are erroneously assessed. Before you use a property as a comparable, at least drive by and look at it, and compare what you see to its listing card. You will look very foolish if you argue that a similar property is being taxed $500 less, only to discover that their property card was never updated after they installed a swimming pool or built an addition several years ago. It happens all the time, especially in localities where physical assessments do not occur frequently.
Professional appraisers are, of course, available to determine market value for a fee. Owners of residential properties probably won't find the cost worthwhile. But owners of larger properties will find that having one or even two professional appraisals in hand is a good idea. If you have recently purchased the property, there may be a recent appraisal done for the mortgage holder that you can get a copy of.
Some jurisdictions officially assess on a fraction of fair market value, and some on 100%. Which method is used is irrelevant -- what matters to you is the consistency of valuation for similar properties.
If you believe there is an error in your assessment, you should check the appeal procedure. Usually the procedure is described on your tax bill or can be obtained from the assessor's office. The most important part of the procedure is the filing deadline. In some jurisdictions you have a fairly short time after receiving the bill, about 30 days, to file an appeal. Miss the deadline and you cannot file an appeal until next year's assessment is received.
Usually it makes sense to talk with the assessor before filing a formal appeal. An obvious factual error on the record card can almost always be corrected without any trouble. But other grounds for appeal often won't be heeded by the assessor. You'll have to go through the appeals procedure.
Appeal hearings tend to be informal. You should have a specific figure that you believe is the correct market value, and evidence to support your figure.
The next thing to check after obvious property errors on the card is whether you have received all the exemptions you are entitled to. Most states have special exemptions of various types -- for senior citizens, for disabled veterans, for owner- occupied properties. You need to find out what exemptions exist in your state and see if you qualify for any of them.
Though the odds of success at the appeals board are high, and millions of people every year do win, you might lose. Then you have to decide whether the case is worth taking to court. You'll definitely need to consult a local lawyer to make this decision. He'll know what the procedure is and also will be able to evaluate the decided cases to determine your chances for success. You have to balance the amount of money at stake (remembering that you will be saved that much money each year for the indefinite future) against the time and attorney's fees involved.
It is rare for a property owner to challenge an assessment, because few know the odds of succeeding or realize how likely there is to be an error in the assessment. Because of the amount of money involved, it is worth your time to take a trip to the assessor's office and examine your property card. It could save you hundreds of dollars per year.
About the Author Adam Starchild has been writing about taxes, personal finance and business for over 20 years. He is the author of over 20 books and hundreds of magazine articles on these subjects. The above article is reprinted with permission from his book How to Save on Your Taxes Without Cheating.
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