Property tax is a tax that an individual or entity pays on a property that is legally owned. In real estate, property taxes are an “ad-valorem” tax. This means that they are based on the assessed value of the property (including the land), as well as tangible personal property such as cars and boats.
What is property tax used for?
Local governments use the revenue from property taxes to finance public projects and services. For example, it may be used to build roads and repair sewers. It may also be used to provide services such as law enforcement, fire departments, and public recreation. Essentially, the purpose of property taxes is to improve the lives of residents.
Unfortunately, property taxes tend to rise over time. As long as you own a property, you will have to pay your property taxes year after year.
Are property taxes the same in all states?
The short answer is no. Some states have lower property tax levels because taxes are directly affected by current real estate market conditions. Hence, you may want to move to a state with lower property tax levels, such as Hawaii, South Carolina, or Colorado.
If you’re living in a state with some of the highest property taxes in the U.S., such as Rhode Island, Ohio, and New Jersey, don’t worry — there are ways to lower your property tax bill. We’ll go over them below:
How can you lower your property tax bill?
If your property tax assessment is higher than you expected, there’s still something you can do about it.
#1 Review your property tax card
Get a copy of your tax card from the local assessor’s office. Your tax card contains critical information about your property, including the square footage, number of bedrooms and bathrooms, and more. It may also include information on any improvements that were made in recent years.
Review your tax card carefully. You may also hire a property manager if you need a second pair of eyes. If you find any discrepancies, raise them with your assessor as soon as possible. They will then correct your tax card and conduct a re-evaluation of your property.
#2 Limit your home improvement projects
Your property tax is directly proportional to your home’s assessed value. Hence, it would make sense to limit your home improvement projects. You can still enhance some aspects of your home, however, you should stay away from upgrades that make your home more attractive.
Remember, during the evaluation, your property will be compared to your neighbors’ properties. If your property is noticeably “better-looking” than theirs, your property tax will likely be higher. If possible, avoid making cosmetic alterations to your home, such as adding a pool or remodeling the kitchen.
If you’ve hired a property management company, they can identify the home improvements that won’t dramatically increase your home’s value.
#3 Consider getting rid of your storage sheds
Does your home have storage sheds that aren’t being used? Consider getting rid of them before the evaluation. Outbuildings such as storage sheds, greenhouses, and garages may be assessed for taxes. This, however, doesn’t apply to every jurisdiction. In some states, only permanent structures of a certain size are included in your property tax.
If you remove them, don’t forget to update your tax card with your local assessor’s office.
#4 Check if you qualify for tax relief
Not all local governments provide property tax relief, but many do have tax exemptions for seniors, homesteaders, veterans, and the handicapped. In addition, properties used for agricultural purposes may be eligible for tax breaks.
It’s important to note that these tax reliefs aren’t automatically applied to your property taxes. Contact your local assessor’s office to find out if you qualify.
#5 Walk through the home with the assessor
Don’t allow the assessor to evaluate the home alone. If possible, walk them through your home. Keep in mind that it’s their job to pinpoint positive features that will increase your property’s value. By being there, you can shift their attention to your home’s negative features.
When walking the assessor through your home, point out the positives and negatives. Don’t pretend that you didn’t renovate your bathroom when you clearly did! Talk about the highlights, but then bring the conversation back to your home’s defects.
#6 Get a second opinion
If you’re not convinced that your assessor’s evaluation is accurate, consider getting a second opinion from an independent appraiser. County assessors and independent appraisers tend to valuate properties differently. If the independent appraiser determines a lower value, you can correct your home’s assessed value with the assessor’s office.
Hiring an independent appraiser will cost you around $200 to $400, but if they determine a lower valuation, you could save thousands of dollars per year.
#7 Move to an area with lower property taxes
Property taxes vary by state, county, and city. If you’re currently living in an area with high property taxes, you may want to consider moving to another county or city. The commute may be longer, but the savings will make it worthwhile.
#8 File a tax appeal
Filing an appeal is the last resort to reducing your property taxes. While you can’t do anything about the property tax rate, you can do something about the assessed value of your home. If you’re sure that the assessor made a mistake, you can file a tax appeal with the assessor’s office.
Keep in mind, though, that filing an appeal doesn’t automatically result in a lower property tax bill. The assessor’s office will still review your appeal based on the supporting documents (e.g. photos of the property) that you provide.
When filing a tax appeal, you’ll need to hire a lawyer. If you’ve hired a property management firm, they may have an in-house attorney who can assist you.
The harsh reality is that the more beautiful your home is, the higher your property taxes will be. Fortunately, there are things you can do to reduce your property tax bill, from avoiding home improvements to filing an appeal.
Hence, when you receive your property tax assessment, don’t assume that it’s set in stone. Review diligently to find any discrepancies. If you need an expert’s eye, hire a property manager from Luxury Property Care. Our team will take a look at your tax bill to make sure you aren’t overpaying on your property taxes.