In the tax world, you hardly ever want surprises. That's especially true for homeowners, who may recently have received property tax assessments that were jaw-droppingly high. But it's possible to lower your property tax through property tax appeals — challenging the value the tax assessor assigned to your home. That “assessed value” is used to calculate how much tax you owe.
One way to lower your property tax is to show that your home is worth less than its assessed value. You can do the initial research online or by making a quick call to your real estate agent.
Let's start with a brief overview of what property taxes are.
What Is Property Tax?
If you're curious about how to lower your property taxes, it's helpful to start by understanding what property taxes are exactly.
Property taxes are taxes paid on owned property, residential or commercial, like homes, buildings, or land. These taxes are usually billed to the property owner.
Property taxes are usually calculated based on a few variables, including the value of the owned property, and will vary depending on the location and legal jurisdiction of the property.
Review Local and State Property Tax Policies
Property value assessment practices vary widely across the country, so getting property tax information from your state and other local government entities is important. For example, some states, like Texas, don’t levy state property taxes; only their local government entities do (and sometimes more than one local government entity). Given that, the property tax appeals process varies depending on whether the local area or state generated the tax. So, you’ll want to know the source of the tax you’re questioning.
Also, you'll want to factor in whether your home generates any rental income. If so, your home would be taxed at a higher rate (though it may also qualify for certain rental property tax deductions).
It’s important to stay up to date on government legislative proposals because tax changes are frequent, and assessment practices can change with little notice. For example, pay attention to how often property is assessed.
Here are some basics about property tax appeals.
What Is a Property Tax Appeal?
If you own property, you should receive a property tax bill. A property tax assessor typically determines property tax rates in a mass assessment. This means your new property tax bill may not accurately reflect the value of your particular home or property. So, it is your right to appeal the assessed value of your property, which could reduce the amount of your property tax bill.
Reasons to Appeal Property Tax Assessment
There are a few common reasons to appeal a property tax assessment, like:
- A change of ownership or control has occurred.
- Recent local sales are less than the estimate.
- Information on the assessment is incorrect.
Can Appealing Property Taxes Lower My Tax Bill?
In some cases, appealing your taxes can reduce your tax bills. For example, suppose a comparable house in your neighborhood recently sold for less than the property value assessment. In that case, a property tax appeal could lead to a revised evaluation and lower your property taxes.
But if you appeal your tax property valuation and the value of the property has gone up since the last assessment because you made improvements, for example, an appeal might lead to an increase in your property tax bill.
How to Appeal Property Tax Assessment Step by Step
#1 Read Your Property Tax Assessment Letter
Local governments periodically assess all the real estate they tax. When your new assessment comes in the mail, it’ll list information about your property, such as lot size or a legal description, as well as the assessed value of your house and land.
Your property tax bill will usually be calculated by multiplying your home’s assessed value by the local tax rate, which can vary from town to town.
If you think your home’s assessment is higher than it should be, challenge it immediately. You generally have fewer than 30 days to do so, though each taxing authority sets its own timeline. The back of the letter often outlines the procedures.
#2 Decide If a Property Tax Appeal Is Worth Your Time
How much effort you decide to put into a challenge depends on the stakes. Likewise, the decision to appeal property taxes may depend on how much you stand to save.
Single-family home owners in the U.S. paid state and local governments an average property tax of $3,785 in 2021, according to ATTOM Data Solutions, curator of a nationwide database. That was a 1.6% increase from 2020. The effective tax rate (property taxes paid as a percentage of owner-occupied housing value) was 0.9% in 2021.
Collections vary widely from state to state. In New Jersey, for example, the effective property tax rates average 1.73% in 2021. In comparison, Hawaii's effective property tax rate was 0.27% in 2021. So, in states with a higher effective property tax rate, appealing the property tax assessment can lead to greater potential savings.
#3 Check the Data on Your Assessment
Make sure the information about your home is correct. Is the number of bathrooms accurate? Number of fireplaces? How about the size of the lot? There’s a big difference between 0.3 acres and 3.0 acres. If any facts are wrong, you may have a quick and easy property tax appeal on your hands.
#4 Get the Comps in Your Neighborhood
Ask a real estate agent to find three to five comparable properties — or comps in real estate jargon — that have sold recently. Alternatively, check a website like realtor.com® to find approximate values of comparable properties that are very similar to yours in size, style, condition, and location. If you’re willing to shell out $375 to $450, you can hire an appraiser to give you a professional opinion of your home’s value.
Once you identify comps, check the assessments on those properties. Most local governments maintain public databases. If yours doesn’t, seek help from a real estate agent or ask neighbors to share tax information. If the assessments on your comps are lower, you can argue yours is too high.
Even if the assessments are similar, if you can show that the comparable properties are superior to yours, you may have a case for relief based on equity. This situation could happen, for example, if your neighbor built an addition while you were still struggling to clean up storm damage. In that case, the properties would no longer be comparable.
#5 Present Your Case to the Local Property Assessor
Armed with your research, call your local assessor’s office. Most assessors are willing to discuss your assessment informally by phone. If not, or if the explanation doesn't satisfy you, you can request a formal review.
Pay attention to deadlines and procedures. There's probably a property tax appeal form to fill out and specific instructions for providing supporting evidence. The length of the review process depends on your municipality, but a final decision might take a few months — or sometimes longer. Expect to receive a decision in writing.
#6 Appeal If You Don't Like the Review
If the review is unsuccessful, you can usually appeal the decision to an independent board, with or without a lawyer’s help. You may have to pay a modest filing fee. If you end up before an appeals board, your challenge could stretch as long as a year, especially in large jurisdictions that have a lot of appeals.
As you weigh an appeal, keep these factors in mind:
- The appeals board can lower only your real estate assessment, not your tax rate.
- Your assessment could be raised, even though the chance is slight. As a result, your property tax would increase.
- A reduction in your assessment right before you put your house on the market could hurt the sale price.
An easier route to savings might be to determine if you qualify for a property tax exemption based on age, disability, military service, or other factors.
Appealing Your Property Taxes
By following the appeals process per local policy, you may be able to lower your property taxes. If your appeal is approved, you could reduce your property tax bill by hundreds or thousands of dollars.
This article provides general information about tax laws and consequences and shouldn’t be relied on as tax or legal advice applicable to particular transactions or circumstances. Consult a tax pro for such advice.