Reuters Money
If you want lower property tax rates, you’ve got to ask
For years, the mantra of American homeownership was to count on home appreciation. Every year like clockwork the value went up and houses were a growing source of wealth.
Now, more than three years after the housing market imploded, the tune is different. It may make sense for you to prove that your home’s value has dropped so you can file for reduced property taxes.
This is the time of the year when local assessors send out notices of your home’s assessed value. Note, however, that this is not your real market value. It’s a base value that’s used to calculate your property taxes. If you want to reduce your real estate taxes, start with paring your assessed value.
You have a reasonably good chance of winning a challenge to your assessed valuation. It’s estimated that some 60 percent of residential properties are over-assessed, although only a handful of home owners appeal, according to the National Taxpayers Union.
As someone who’s volunteered with a local non-profit in Northeastern Illinois on property tax issues, I know it’s worth fighting assessments every year. Sometimes I win, sometimes I lose. If you feel that your assessment is too high, there are many ways to challenge it, but it takes some homework and diligence.
You can always start by checking the property record of your home, which is on file with the assessor. Does it have the correct number of bathrooms and bedrooms? Is the total living space correct? Does it list a finished basement in error? You can fix any incorrect data by either allowing the assessor to inspect your home or by submitting an approved builder’s drawing or survey.
Although you can dispute the assessed market value of your home with your assessor, it’s not an easy task since you may need at least three comparable homes in your neighborhood with lower values.
How to cut property tax with an appeal
This may sound crazy, but you need to lower your home’s value.
I’m not suggesting you damage it in any way. Just challenge what your local assessor is saying it’s worth so that you might be able to lower your property taxes. I try and do this every year with some success.
With property values still down across the board in most places, now is the best time to appeal your home’s value. We’re entering the season in which assessors release valuations of how much your home is worth for tax purposes. Their valuation is one part of the basis for your property tax bill. The valuation times local tax rates (for schools, fire protection, etc.) equals your real-estate bill after exemptions and other local factors are applied.
Most counties give you a limited window in which to appeal your valuation – typically about a month. After that, you’ll have to wait until next year to do an appeal. Don’t wait. You’ll need to do a lot of homework to win a successful appeal. Because only 30% of all homeowners appeal their assessment, you have a good chance of getting a hearing on how to lower your valuation.
You will be appealing last’s year valuation – not this year’s – since property taxes apply only to the previous year. So what’s happening in your market now isn’t relevant to your assessor. Also don’t confuse an assessed valuation with a market value. They are not the same thing. A market value goes through a real estate appraisal process for purposes of selling a home. Your local assessor makes a much more basic calculation based on your neighborhood, type of home and improvements.
Here’s what you need to know:
• Is Your Property Record Correct? It’s public information as to how many bedrooms and bathrooms you and your neighbors have. Check your assessment record. If they have you incorrectly listed for an extra bath or finished basement, go right to the assessor to fix that. It could easily lower your tax bill.
You can also appeal commercial property assessments, but it’s best down with a lawyer and appraiser who specialize in this area.
Unfortunately, dropping your assessed value is no guarantee of a lower tax bill if your taxing bodies raise their rates. The only way to address that is to keep putting pressure on them to reduce their costs, no mean feat as they grapple with pension liabilities and lower tax revenues.