Here's Who's Paying Up to 50% More in Property Taxes

Across the country, low-income homeowners are paying more in taxes.

By studying tax records covering 99% of the country, researchers from The University of Chicago uncovered a startling fact: Homeowners in lower-income, predominantly Black neighborhoods pay around twice as much in property taxes as homeowners in wealthier nearby neighborhoods.

Why it matters

Homes continue to be the most significant asset owned by American households and one of the primary drivers of household wealth. Of course, owning a home involves paying all kinds of extra expenses, like maintenance, repairs, and property taxes. When homeowners are forced to pay a higher tax rate, they are left with less money and less opportunity to build wealth.

What was uncovered

One example involves Chicago neighborhoods. According to researcher Christopher Berry, homes worth $500,000 or more were taxed at a rate of around 1.5% or less. At the same time, homes that sold for $100,000 or less were taxed at a rate of about 4%. The same was true in other cities, like New York, New Orleans, and Detroit.

How it's supposed to work

A property tax is an "ad valorem tax." This means property taxes should be based on a property's value. But unlike a new car or loaf of bread, there's not always a clear picture of how much a property is worth. That's because homes don't go on the market very often. Determining the "value" of a home is a matter of estimating what it's worth, and it's the local tax assessor's office that provides the estimate.

If the University of Chicago study had found the pattern in a few cities only, it would be easy to write it off as a glitch. The fact that homeowners in Black neighborhoods across the country pay a larger slice of their income for property taxes indicates more than a glitch.

Berry is confident it's an example of structural racism. He told The Washington Post, "African Americans and other minorities are more likely to own low-priced homes. This means that minorities are more likely to be overtaxed because they are more likely to own low-priced homes."

What's the difference?

According to another study -- from the Massachusetts Institute of Technology (MIT) -- Black Americans pay an average of $390 more in property taxes annually than white Americans. Factoring in how much more Black Americans pay in mortgage interest and insurance premiums, MIT figures they pay $13,464, on average, more than white Americans over the life of their home loans.

This means the poorest homeowners are stuck with the largest tab (proportionately) for public services, like libraries, roads, parks, schools, and first responder services.

What you can do

If you live in a modestly priced neighborhood and wonder if your taxes might be out of whack, there are steps you can take to find out. Your first step should be to contact your local tax assessor's office and ask about the tax rate for your neighborhood.

If you have any suspicion the assessor's office has estimated your property to be worth more than it is or that you've been charged with a higher tax rate than wealthier neighbors, take the following steps:

Appeal the assessment. Don't wait to file an appeal with the tax assessor's office. Depending on where you live, you may only have two weeks to a few months to let your concerns be known.

Check out tax assessments around you. Find out how much your neighbors (and homeowners in neighboring areas) are paying for property taxes by looking at county tax records available through the county records office. These records are frequently online, so check out the county records office website before leaving the house. If your taxes are noticeably different from your immediate neighbor's, there may be a problem. If you're paying nearly as much in property taxes as homeowners from a more expensive neighborhood, the same is true.

Get an appraisal. Depending on how much your property taxes are, it is likely to be worth your time and money to pay $300 (or so) for a professional home appraisal. An appraiser is a third party with no dog in the race. For that reason, the assessor's office is likely to pay special attention to the appraiser's assessment of your home.

Be polite. The assessor's office is accustomed to angry homeowners. Make it difficult for them to write you off by approaching your tax concerns calmly and rationally. Have all evidence with you, including the value of surrounding properties (if it helps make your case).

Find out about property tax abatements or exemption programs. Some areas (either town, city, or county) offer tax abatements and exemption programs to help homeowners lower their property taxes. Find out two things: If there are any such programs in your area, and if you qualify.

If you've tried everything and still can't get anywhere with the assessor's office, consider hiring a property tax service that specializes in property tax appeals. Sometimes these services charge a flat fee, and sometimes they are paid by a percentage of what they help save you in property taxes.

While it may be true that nothing is certain but death and taxes, there's no reason to pay more for taxes than necessary.