High Property Taxes? Challenge Them!

Let’s change the subject from pandemics to a different type of scourge: taxes.

Sorry if I’ve spoiled your mood by bringing up taxes, but it’s that time of year when homeowners start to receive recalculated monthly mortgage bills, based on the latest property tax assessments. Make sure the government doesn’t levy more than necessary on your home. For most Americans, the home is their biggest asset.

Most state and local tax authorities calculate property taxes based on the value of the homes located within their areas. If you pay property tax, claiming the tax deduction is a simple matter of itemizing your personal deductions on Schedule A of Form 1040.

However, homeowners tend to uncritically accept the tax assessment on their homes, even if an assessment is wildly out of whack. You could be paying hundreds or even thousands of dollars more in property tax each year than you should be.

Below, I’ll show you step-by-step how to challenge an excessive assessment. It’s possible to win and if you do, you’ll reap a big reward. These proven methods can reduce your annual property tax bill, by disputing an assessment that you suspect is unfair.

Before you get your assessment notice from your local government, check the deadline for challenging the value.

Property tax rules vary by locality, but generally in most jurisdictions, you have 90 days after you receive a new assessment to appeal. Many property owners challenge their assessments each year and between 20% to 40% win lower assessments and lower property tax bills. So it’s worth a shot.

Making your case…

To make a case for a lower assessment and property tax, you must demonstrate that your home’s assessment is excessive predicated on any one of these conditions:

  • Your tax rate differs greatly from that of your neighbors.

Your assessment could be excessive compared with people who live close by. Properties in your neighborhood that are similar in style, size and amenities should carry similar assessments.

For example, if you live in a three-bedroom colonial on a half-acre of land and the house across the street is almost identical but their property taxes are considerably lower than yours, you’re getting gouged.

Pay a visit to your assessor’s office and ask for your neighbors’ assessed values and tax bills. They’re legally accessible to you. Try to unearth tangible evidence of a discrepancy compared with three to five nearby homes like yours in the same area.

  • The assessor’s record contains factual errors.

An inadvertent numerical mistake can generate an excessive assessment. At the assessor’s office, ask to see your property’s record card. Verify the property description, square footage of the lot and home, materials used and major features, including number and types of rooms. A simple mistake in math could be robbing you of thousands of dollars every year.

  • Recent sales prices.

Homes comparable to yours may recently have changed hands for less than the value on which your assessment is based. Conduct research on comparable properties that have sold within the last six months.

An easy, quick and efficient way to track down price information is from local real estate agents. An agent will have all of this price information in their databases.

  • Sales prices compared with assessed valuations.

Look up the assessments on recently sold properties. Ask your real estate agent how your town’s assessments compare with sales prices.

Divide the average assessment for the group of recently sold homes by average sales price to determine percentage of market value. If your home is assessed at a significantly higher percentage, you may have a convincing case.

Assessments usually are appealed at an informal meeting with the assessor, or by application. If the assessor rejects your claim, you can appeal to a local or county review board.

Your real estate agent will know about the procedure and filing deadline. If your case involves a relatively large sum, it would pay to have a lawyer or real estate agent present your case.

Editor’s Note: Keep an eye out for an exciting offer from our flagship publication, Personal Finance. It’s a new trading advisory run by Jim Pearce, the chief investment strategist of PF. Want to take investing to a whole new level? Watch this space for details!

John Persinos is the editorial director of Investing Daily. Send your questions or comments to mailbag@investingdaily.com. To subscribe to John’s video channel, click here.