Thursday, September 19, 2013

Consider an appeal if your property taxes seem too high

Home prices in many parts of the country have not fully recovered, yet many homeowners are still paying property taxes that reflect appraisals performed at the peak of the housing market. According to the Congressional Budget Office, property tax adjustments tend to lag behind changes in home prices by an average of three years. Accordingly, many homeowners — some watchdog organizations estimate over 50 percent — are paying too much property tax.

To determine whether your tax bill is a good candidate for appeal, consider the four components that local agencies use to calculate property taxes:
  • Appraised value. The appraisal may be based on comparable sales, in-home visits, community-wide reassessments, computer models, even aerial photographs.
  • Assessment ratio. In some states, taxes are based on a percentage of appraised value. Other locales set taxes at 100 percent of current market prices.
  • Assessed value. Multiply appraised value times the assessment ratio to arrive at assessed value.
  • Tax rate. Set by local governments to cover various costs, including road maintenance and school expenses, this rate varies among regions. Typically, it's figured for every $100 of assessed value. So if your assessed value is $150,000 and the tax rate is .025, you'll be charged $3,750 in annual property taxes.
Of these four components, it's wise to focus on the one that's the most subjective and controllable: the property's appraised value. Railing against exorbitant tax rates, while possibly therapeutic, probably won't yield favorable results at city hall.

To get started, find out your local taxing authority's process for filing appeals. Next, obtain a copy of the assessor's property record card, which summarizes the characteristics of your home. Compare data on the card to the physical attributes of your house. Is the square footage accurate? Does the assessor claim you have three bathrooms instead of two? Is your basement listed as "finished" when, in fact, it's a barely accessible crawl space?

Stroll through your neighborhood, taking photos and jotting down addresses of homes that have sold recently. When you get home, check the county's online tax assessment listings. If owners of larger and more amenity-laden houses are paying lower property taxes than you are, take note.

Finally, lay out your evidence to local decision makers, presenting all documents in an organized manner. Be courteous, but firm. If you don't win the appeal (and cost-benefit considerations warrant further action), consider hiring a tax attorney or property tax consultant.

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