As property values rise, a creeping tax looms. Left unchecked, property tax bills can swell over time. To prevent this annual pain in the pocketbook from getting out of control, know when to appeal your tax assessment.
How property tax is calculated
Your home’s value might be determined for tax purposes by the most recent purchase price, or by a blanket assessment of a neighborhood’s estimated property values. That value is then multiplied by a percentage, often called a millage, to calculate your taxes owed. Depending on the state, property values may be revisited every year, or much less frequently.
“In some states, in theory, they haven’t revalued since 1967. They take that value and somehow extrapolate it forward for inflation or this, that and the other,” says John A. Cocklereece Jr., an attorney for Bell Davis & Pitt in Winston-Salem, North Carolina.
When tax assessments aren’t adjusted frequently, “values can get way out of hand a lot quicker and stay that way a lot longer,” he adds. Admittedly, that can work for you — or against you.
It may take a trip to your tax assessor’s office to compare your home’s assessed tax value with nearly identical properties nearby to see if your home is valued fairly.
When your tax assessment is wrong
Even jurisdictions that reappraise values often can get it wrong.
“That absolutely can happen,” says Debra Bawcom, senior property tax consultant at Texas Protax in Austin. Your property might be incorrectly valued if a jurisdiction has documented the wrong number of bedrooms, bathrooms or square footage in your house, she adds.
If you think there’s an error in your assessment, the first step is to call your local tax assessor and explain your concerns. If this conversation convinces you that an appeal is worthwhile, ask what the process is.
Many jurisdictions limit the hearing of appeals to a period following the issuance of new tax notices.
Information you may need to gather in your effort to win an appeal can include:
- An independent appraisal of your home and property.
- Original construction plans.
- Comparable recent sale prices on nearby homes similar to yours.
Property tax freezes and automatic increases
In some states, senior homeowners or residents with low to moderate incomes may be eligible for property tax freezes, capping the property tax or future rate increases. And most tax authorities grant a “homestead exemption” — a tax discount if the property is your primary residence.
If home values are increasing where you live, property tax rates should be falling, Bawcom says. If not, you’re being hit with an automatic tax bill increase. An individual appeal may help, but you’ll need to rally community support for a millage-rate decrease.