As a homeowner, I'm used to receiving my annual property assessment showing not only how much my house is supposedly worth, but how much tax I'll pay on it as a result. And while some home values mostly stay the same year after year, it's not unheard of for an assessment to increase significantly from one year to the next, even if there's no apparent reason. That's precisely what happened to me when my local assessor valued my home at $50,000 more than it had supposedly been worth the previous year.
I had two choices: I could sit back and wallow in my soon-to-follow property tax hike, or I could appeal my assessment and try to get that number lowered. I opted for the latter, and while it took some effort, in the end, I got my property assessment lowered and thereby shaved a considerable sum of money off of my tax bill.
I learned some pretty interesting things while doing research for my appeal. First, according to the National Taxpayers Union Foundation (NTUF), 30% to 60% of properties in the U.S. are over-assessed, thus leading to higher tax bills for countless homeowners. Furthermore, middle- and lower-income households -- those who are struggling to keep up with their housing costs to begin with -- who are the most likely to have their homes over-assessed.
Despite these telling statistics, the NTUF estimates that fewer than 5% of property owners take steps to appeal their assessments, even though the majority of people who do so get a partial reduction at the least. If you're unhappy with your property's assessment, you should know that you have the option to fight back -- and lower your long-term housing costs in the process.
How property taxes are figured
Many people pay their property tax bills without putting much thought into it, but your property taxes are a function of your local tax rate multiplied by the assessed value of your home. If, for example, you live somewhere with a 2% tax rate and your home is assessed for $500,000, then you'll pay $10,000 a year in property taxes.
If you're thinking the number in that example is unrealistic, think again. While the average American household pays just $2,127 per year in property taxes, in some parts of the country, homeowners pay 10 times that amount or more. Not only that, but tax rates can fluctuate within states, so homeowners in the county next door could be paying double the rate you pay.
In any case, your property taxes correlate directly to your assessment, so it's best to keep that number as low as possible. If you're worried that lowering your assessment will hurt you when the time comes to sell your home, fear not. First of all, it's possible for a property's market value to exceed its assessed value, especially if the neighborhood in question is particularly desirable. Secondly, a hefty property tax bill can hurt your chances of finding a buyer. Annual taxes are often included in real estate listings, and if your taxes look overly high, potential buyers might run the other way.
Of course, appealing a property assessment does involve some legwork. But if you're willing to put in the time, it could prove very worthwhile.
Appealing your assessment
First, let's get one thing straight: Just because your property assessment goes up doesn't mean it's actually wrong. Perhaps you've made improvements, or maybe market conditions have improved in your area, and as a result your home is now considered more valuable. But if you have reason to believe that your assessment is inaccurate, you shouldn't hesitate to take action.
To start, review your assessment and make sure it doesn't contain any obvious mistakes. If, for example, your home is listed as a 3,000-square-foot property when you know you only have 2,000 square feet of living space, that's an easy argument to prove. Similarly, if your assessment indicates a finished basement when you don't actually have one, that's certainly grounds for a reduction.
Assuming your assessment doesn't contain errors, your next move is to identify properties that are comparable to yours and see how their assessments look. (Assessments are generally a matter of public record; you can typically access them by searching through county databases online.) Similarly, you can try to find comparable homes that have recently sold in your area for less money than your property's assessment value. If, for instance, you locate a nearly identical house three blocks away that's assessed for $20,000 less than your property, then you can use it to make your case.
Once you've done your research, it pays to contact your local assessor and attempt to negotiate a settlement directly before filing an official appeal. Some assessors will agree to a reduction if your case is strong enough, especially since it helps them avoid the hassle of having to deal with a property tax hearing. If your assessor doesn't see things your way, your next course of action is to file an appeal.
You have the option to file an appeal yourself (it can typically be done online) or hire an attorney to do it for you. If you're seeking a significant reduction, it might pay to enlist a professional who can not only handle the research, but also argue your case during your appeals hearing. Most attorneys who deal with property tax assessments work on a contingency basis, which means they only get paid if you actually win. That said, if you're willing to do your own research and aren't intimidated by the notion of taking on your local assessor in court, you can tackle the process yourself and avoid forgoing a portion of your tax savings in the event of a victory.
As far as the cost of a tax appeal goes, it depends on where you live and the assessed value of your property. Where I live, it costs $25 to file an appeal if your home's assessed value is $500,000 or less. If your local fees are much higher and you're only looking at minimal savings, then going through the appeals process may not be worth it. That, however, is a judgment call.
If you think your home is being over-assessed, filing an appeal could shave hundreds, or even thousands, off your property tax bill year after year. While it might cost you some time and a modest filing fee, it'll be well worth your while if you come out a winner.