Home > Ways to Save Money > How to Appeal Your Real Estate Taxes
When it comes to taxes, most people are rightly focused on income taxes, especially at this time of the year.
But for most people, the second biggest tax you pay are the real estate taxes you pay on your home. And just as you would when it comes to your income taxes. you should also do what you can to minimize real estate taxes.
However, you won’t have an opportunity to take advantage of tax breaks and loopholes as with income taxes. The only way to lower this tax bill is to appeal your real estate taxes.
The Goal of Your Appeal
If you’re going to appeal your real estate taxes, the first thing you need to do is set the priority. Most people think that the object is to lower your real estate taxes, and that’s entirely wrong.
Real estate taxes are set by the local governing authorities – your county or municipality – and it’s based primarily on a set millage rate. This is the tax rate applied to the valuation of your property that ultimately produces your real estate tax bill.
Unfortunately, there’s nothing that you can do about the millage rate. It is set by the local community, and applies to all properties within the jurisdiction. The only part of your tax bill you have any control over then is the value of your property. or more particularly, the value governing authorities are carrying on their books. It may not be an accurate valuation, and that’s the point that you should be focused on.
If you want to appeal your real estate taxes, here are some terms you need to become familiar:
This is the value that the governing authorities assign to your property.
These are the special credits and adjustments. Some affect the amount to be taxed; some adjust the tax you must pay. Be certain you are getting all the exemptions you qualify for, like a senior citizen credit.
If there are any you’ve overlooked, file for them immediately. Go ahead and apply for them even if you aren’t certain you qualify – there’s generally no penalty or fee for applying. The worst that can happen is the request will be denied.
They are sometimes called “comps,” as in comparables. They represent properties similar to yours in terms of age, location, square footage and construction (“like kind and quality”). Laws may put geographic limitations on what you can consider, so check with the government appraisers first. The more identical they are, the better your chance of being successful in your appeal.
Make certain what you own is taxable – not all property is. Certain circumstances and uses may make you totally out of reach of the tax man. If you don’t think you should be paying taxes, that can be appealed as well. Nothing ventured, nothing gained.
Background Work You Have to Do
Before you file your return or your appeal, do plenty of research. Check the files with the government for accuracy – never overlook the obvious. Find out the last time there was a valuation done. Find out when your specific location was last reviewed and when the your general neighborhood was examined.
If you’ve refinanced recently, examine the bank’s fee appraisal. It will be the bank’s judgment of how much the house is worth measured against similar properties that have sold in recent months. Compare it to the government appraisal. Counties and municipal governments do mass appraisals comparing great chunks of real estate, but not concentrating on one address at a time. The bank appraisal will focus
specifically on your property.
Perform the following:
- Document any discrepancies between the government appraisal and the bank appraisal.
- Use the county or city’s records to review the appraisals of similar properties.
- Gather documentation of recent similar sales close to yours.
Your goal is to find the correct value of your real estate, which may not be anything close to what the tax authorities are using. If you believe the value of your property is significantly below what the authorities are carrying on their books, that discrepancy will provide the basis of your tax appeal.
Developing Your Battle Strategy
When you receive your tax notice, you’ll be ready to evaluate it against your research. You should plan on challenging your assessment every year, unless the assessed value drops significantly.
Contact the office that issued the tax notice. Speak with the person responsible for your file and see if they are open to a modification. Every state has a method of adjusting your appraisal.
Mediation, arbitration, and direct filing of a judicial appeal are normally offered, but all states have a board of citizens you can bring your challenge to without any filing or court fees. That’s the route you want to take if an initial compromise isn’t possible.
File your appeal early and in the manner directed by your jurisdiction (it will vary somewhat from one to another). Then prepare your presentation, based on your research. Set your target value for your property, then decide which approach you will follow.
There are two plans of attack:
- Uniformity – This means there are other similar locations appraised lower than yours.
- Fair Market Value – Which basically means that if you were to sell, no one would offer you the assessed value the tax authority is carrying on its books.
The legal definition of “fair market value” is the price in an open transaction a willing buyer would pay a willing seller. Check with your appraiser if foreclosures and bank sales were included in their estimate of your holdings. If they are numerous in your area, then they will have an effect on your property value, and it will be negative. That will be favorable to your appeal for a lower value.
Include in your material the following:
- Photographic evidence – your property and the comparable sales from the area.
- Documentation of recent sales – actual closed sales, not listings.
- Confirmation of recent appraisals of the similar properties.
- Don’t present out-of-date appraisals or sales – generally those that are more than one year old.
- If your property has major deficiencies – compared to comparable properties – include written estimates of the cost to bring the property to standard, and use it to reduce the value of your home; for example, your basement is unfinished while the comparable sales all have finished basements.
You don’t need to bring witnesses or present statements, even if they are sworn and notarized. The board listening to your appeal is not a court. The board members will decide whose opinion of value – yours or the government’s – carries the most weight and is supported by the power of the evidence.
Getting your real estate taxes reduced may seem a bit daunting, but many property owners do it every year. It’s something you can do yourself, and do again if need be. Practice makes perfect, so if you are not successful the first time, try again next year and learn from your mistakes. Keep your research and add to it every year.
Have you tried to appeal your real estate taxes? If so, were you successful? Leave a comment!