How to Beat Higher Property Taxes

Real estate values are climbing, and local property taxes are soaring with them. If the real estate tax rate stays the same and your home appreciates, your real estate tax bill rises at the same rate as the appreciation.

In my recent trip to Naples, Fla., I learned that the prices of most residences there increased 100% or more in the last five years. I don’t know about you, but my income has not increased at that rate. Few of us have budgeted for such rapid property tax increases.

It might be possible to cut your property taxes. To reduce real estate taxes, you have to act quickly. This is the time of year in most of the country when action is required. In some areas, it is too late for this year. If so, start preparing for next year.

Real estate taxes can be reduced by appealing your property tax assessment. Some surveys indicate that 50% or more of properties are over-assessed. That’s an exaggerated number. It is based on the fact that in most jurisdictions, about 50% to 60% of homeowners who appeal their assessments to the final administrative level get some kind of reduction. But very few people file appeals, and many of them settle before the final step.

The exact appeal process differs around the country, but the basics tend to be similar.

The first step is to get your notice of appeal in by the deadline. Most areas discourage appeals by mailing new assessments at a busy holiday time and requiring notices of appeal to be filed within 30 or 60 days. Fortunately, your case doesn’t have to be prepared in that time. You just need to notify the government of your intent to appeal. Many areas now allow a notice to be filed online and will confirm receipt by e-mail.

After filing the notice, gather your facts.

Determine the relationship between the assessed value and market value. Some areas use full market value as the assessment. Others cap the assessment at a percentage of market value or a percentage increase over the prior year’s value, regardless of market value. You need to determine the formula your jurisdiction uses and work backwards to determine the estimated market value the government used.

If you believe the home could be sold near that estimated market value, your appeal is unlikely to be successful. You should withdraw it. Otherwise, consider developing evidence to support the most common grounds that win appeals.

The easiest and most important ground for winning an appeal is that there was a mistake. First check the calculations to make sure there was not a data input or arithmetic mistake.

The assessor does not visually inspect each house. The government’s records (such as building permits) are examined to determine the features of each house. Then, the market values of homes that are believed to be similar in features and location are estimated.

Check the government’s worksheet on your home. Many governments now have the worksheet data available online; others require that the information be requested.  Some governments also provide a list of recent sales of what it considers to be comparable properties.

The worksheet might say that your basement is finished, when it is not. There could be other errors such as square footage, number of bathrooms, size of the deck, etc.

Also, survey your property for negative features that are not on the worksheet.  Perhaps you have a bad foundation or some kind of damage that permanently reduces its value. Some areas will reduce your assessment if you can point out that the comparable sale properties had updated kitchens or other features that yours lacks.

Any physical evidence you can present with the appeal would be helpful. Evidence could include photographs and descriptions of your property and the comparable properties.

Those are your three main grounds for winning a real estate appeal: calculation errors; mistakes about the house; and factors about your house that make it not comparable to recent sales.

In most areas there are several steps to the appeal process. The initial step often is to send some kind of writing to the assessor’s staff. This can be followed by an informal meeting with the staff. If there is an obvious mistake about your property, you might be successful here. The next step would be a more formal appeal to a Board of Assessment or similar body. If that fails, the final appeal usually is to the courts. Few taxpayers appeal to the courts because the potential costs outweigh the savings from winning the case.

Most jurisdictions make available statistics about real estate appeals. For example, in Arlington County, Va., of 59,000 homes assessed, only 648 appeal for a review from the assessor’s office. In 28% of those cases, the office reduced the assessment. Another 266 appealed to the Board of Equalization, and 55 of them had their taxes reduced.

Don’t pay for expensive seminars or publications. The assessor’s office usually is helpful and will provide all the information you need. Many localities have one or more taxpayer advocacy groups that provide tax appeal information. You also might want to check the library for books on reducing property taxes.