Photo credit: Flickr/Donkey Hotey.

Across the country, the financial condition of many state and local governments has steadily declined, as the increased demands on resources makes it increasingly difficult to balance government budgets. At the local level, property taxes are often the most visible and lucrative way for governments to raise money, and because assessments of real estate are based on estimates of actual value, the potential for error can be substantial -- and costly to the taxpayer. Fortunately, most governments allow you to file for a tax abatement if the assessor's estimate of value is incorrect. Winning isn't automatic, but if you succeed, you can save yourself hundreds or even thousands of dollars in tax liability. Let's take a closer look at why so many property-tax assessments lead to unnecessarily high taxes and how the tax abatement process can help you cut your tax bill.

You deserve a (tax) break today
When it comes to tax breaks, many Americans think that major corporations get all the good deals from state and local governments. Inevitably, states and cities line up to try to attract major employers to their areas, offering no-tax treatment for years or even decades in the hopes that they'll make up lost revenue through income and property taxes paid by their new workers.

By contrast, many homeowners think they have no chance of getting a tax break from a state or local government. Yet the tax abatement process gives you exactly that right, allowing you to challenge the value that the government puts on your property.

Assessed values for real estate are notoriously inconsistent and often inaccurate, failing to reflect changing market conditions. In the aftermath of the housing boom, for instance, as much as 60% of all property had inflated assessments, according to the National Taxpayers Union. More recently, even after years of decay and moves to cut assessed values, Detroit residents have taken to the streets to protest grossly inflated property values in what has become an urban wasteland.

2 types of tax abatements
Tax abatements take two different forms. In some areas, you can apply for special programs that encourage specific types of property improvements, granting explicitly reduced property valuations for tax purposes. Some of these programs focus on encouraging development of particular areas of a city or town, while others focus on property that meets affordable housing standards or limit eligibility to those who meet maximum income requirements. Some programs encourage new building, while others look toward historic preservation of older homes.

The other type of tax abatement centers on disputes about valuation. Whenever your state or local government appraiser establishes new values for your property, you can appeal their valuation. The procedures vary from place to place, but in general, they typically involve a hearing to present your case before an official board or other government body.

In order to prevail, you'll need to present a convincing case. Merely asserting that valuations are inaccurate won't be enough, and instead, you'll want to collect the same type of information that professional appraisers use. Data like sales of similar houses in nearby locations, statistics about the current condition of your home, the overall attractiveness of your neighborhood, and trends in property values over time can be helpful in establishing your case. The more documentation you can gather supporting your view on valuation, the more likely it is that you'll win your case.

There are a couple of things to keep in mind about challenging valuations. First, filing a dispute opens the door to a government rebuttal that your property is actually worth more than its assessed value. That shouldn't necessarily intimidate you if you have a convincing case, but tax assessors often use that implied threat to keep you from taking action. Also, make sure that you find out about the specific deadlines that apply in your area. Usually, you'll find that you have an extremely limited period of time to challenge your assessed value, so don't delay if you want to take a stand.

With so many Americans struggling to make ends meet, paying ever-higher amounts of property taxes simply adds insult to financial injury. By knowing how to use the system to your advantage, though, a tax abatement can be just the answer you need in order to make sure you pay only your fair share of your tax burden.