If you ask most homeowners about their property taxes, they'll likely tell you that they pay too much. That's why it's worth knowing whether you can get your property tax bill lowered.
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. They tend to rise steadily over time.
Even after you pay off your mortgage, the property tax bills keep coming until you no longer own a home. So, here's a quick review of property tax bills and some simple ideas that may help you lower yours.
It's important to know how your municipality calculates your property tax. Two neighboring towns may calculate them differently, which can be confusing for residents.
Property taxes are calculated 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 the amount of money it needs to pay for important services. State law determines how often the rate at which taxing authorities reset their tax rates. Some states change them annually, while others do so in different increments, such as once every five years.
An assessor, hired by the local government, estimates the market value of your property (which includes 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 they may complete property assessments remotely using software with updated tax rolls.
Next, your local tax collector's office sends you your property tax bill, which is based on this assessment.
In order 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 will be $7,500.
1. Ask for Your Property Tax Card
Few homeowners realize that they can go down to the town hall and request a copy of their property tax cards from the local assessor's office. The tax card provides the homeowner with information the town has gathered about their property over time.
This card includes information about the size of the lot, the precise dimensions of the rooms, and the number and type of fixtures located within the home. Other information may include special features or any improvements made to the existing structure.
As you review this card, note any discrepancies, and raise these issues with the tax assessor. The assessor will either make the correction and/or conduct a re-evaluation. Though you might not think so, mistakes can be common. If you find them, the township has an obligation to 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 of an increase that a new addition means to 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 the change.
3. Limit Curb Appeal
Tax assessors are given a strict set of guidelines for the actual evaluation process. 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.
Keep in mind, your property is essentially being compared to 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 ahead because the assessor normally schedules a visit in advance.
Make any physical improvements or cosmetic alternations to the home after the assessor finishes the evaluation.
4. Research Neighboring Homes
As mentioned above, information about your home is available at the local town hall. In many cases, information about other home assessments in the area is also available to the public.
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.
5. Allow the Assessor Access to Your Home
You do not have to allow 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 exorbitant refurbishments. This could result in a bigger tax bill.
Many towns 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 with the town, 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 about their homes unguided during the evaluation process. This can be a mistake. Some assessors may only see the good points in 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 some small cracks are visible in the ceiling.
To prevent this from happening, be sure to walk the home with the assessor and point out the good points as well as the deficiencies. This can help ensure that you receive the fairest possible valuation for your home.
7. Look for Exemptions
Exemptions don't just apply to religious or government organizations. You may qualify for an exemption if you fall into certain categories. Some states and municipalities lower the tax burden for:
People with certain disabilities
Check with your taxing authority to see if you qualify for an exemption that wasn't applied.
8. Appeal Your Tax Bill
If you believe your bill should be lower but haven't managed to get your tax assessment office to see things your way, don't fret. You still have an option available: the tax bill appeal.
If you decide to appeal, file in a timely manner; otherwise, you're stuck with the bill you receive from your local tax office.
Filing a tax appeal may 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 likely charge you a fee—sometimes a portion 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 to the most recent assessment and tax bill, and make a decision. You may hear something 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. But that will lower your tax bill.
Keep in mind, though, that the appeal process is not a guarantee that your bill will drop. It may remain the same or, in rare cases, it may increase if the reviewer feels your assessment is too low.