If you're a homeowner, you probably pay a big property tax bill every year. While the average American household spends an estimated $2,197 on property taxes annually, homeowners who live in high-tax states or own valuable properties spend much more.
Your property tax bill may become even more burdensome to pay in 2018, thanks to new limits on the deductibility of state and local taxes. The deduction for these taxes -- called the SALT deduction -- was capped at $10,000 starting in 2018 thanks to the Tax Cuts and Jobs Act that reformed the U.S. tax code.
This means if your combined local taxes, including property taxes, exceed $10,000, you won't be able to deduct all you pay and will be charged federal tax on money sent to the local government.
Whether you can deduct all the property taxes you pay or not, these taxes can still cost a fortune. That's why it's worth considering whether you could reduce the property taxes you owe.
Can you get your property tax bill lowered?
Property taxes are based on the assessed value of your home, multiplied by the tax rate set by your county or municipality. Some counties -- especially wealthier ones with good school districts -- have much higher tax rates than others. There's no way to change the tax rate you pay, other than voting for politicians who promise to cut property taxes. You can, however, potentially get the assessment on your property changed.
Essentially, this involves asking your taxing authority to use a lower value for your property. If your property is assessed at $200,000 now and you have a 1.25% tax rate, your property taxes would be $2,500. If you were able to get the assessed value lowered to $150,000, your taxes would be only $1,875. You'd lower your bill by $625 annually.
Getting your assessment lowered may not be as unlikely as you think. According to the National Taxpayers Union, between 30% and 60% of all properties in the U.S. are overassessed. If yours is one of them, you could be paying way more than necessary.
How do you get your assessment reduced?
Your local government isn't just going to reduce your assessment because you ask. You'll need to follow a formal process for appealing your assessment. The steps in this process vary from county to county. Typically, you must submit a form or paperwork indicating you're challenging your assessment. There's usually a strict deadline, so visit the website of your county tax assessor to find out the time frame to take action.
When you submit your request for a reduction, you must provide proof to back up your argument that your property should be valued lower than it is. You can hire a professional appraiser to give you an appraised value of your home. This costs a few hundred dollars, but is often worth it because appraisals are persuasive evidence.
You can also provide proof that comparable properties in your local area are valued below what your home's assessment is. You can look at recent real estate sales, check your neighbor's tax assessments, or get help from a realtor in finding properties to use to prove your home is overvalued.
Depending where you live, submitting the paperwork may be all you need to do. Some municipalities, however, require you to attend a hearing. This is usually a pretty straightforward process in which you're asked some questions about your property and about your appraisal or comparable homes. If your assessment or the comparable properties you've provided prove your home is overassessed, your home's value for tax purposes should be reduced -- and your taxes will go down along with it.
Don't pay more in taxes than you need to
While there are lawyers and specialized firms that help appeal property taxes, the process is usually pretty simple to do on your own. Visit your county's website, check out the forms, and see if you can find comps or an affordable appraiser.
All these steps don't take long, and you could be well on your way to saving hundreds of dollars every year if you can successfully get your assessment reduced.