If you’re paying bubble-era property taxes on your post-meltdown house, listen up.
No, you don’t have to sell your home and move in order to pay lower property taxes. I’m a big advocate of, instead, appealing your property tax assessment to save big money. It’s easier than you may think, albeit tedious. And if you’re 55 or older, you may also be eligible for special age-based property tax breaks or income-based property tax exemptions that are enhanced by age — but you won’t get them unless you apply.
Exploring these options is especially smart these days. The reason: Most home values have fallen (sometimes drastically), but property-tax assessments imposed by cash-strapped local governments haven’t necessarily caught up with reality.
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For example, I recently heard about a New Jersey couple whose property taxes have gone up by 47 percent over the past seven years — while their home’s value plummeted by 22 percent. Ugh.
Appealing your property tax assessment can be well worth the time. The National Taxpayers Union says that most homeowners who appeal win at least a partial victory. But fewer than five percent of U.S. homeowners even try. I encourage you to be one of the few, the brave.
Hire a Pro to Appeal Your Property Taxes
One way to try to lower your property taxes is by hiring a tax attorney to make the appeal for you.
You’ll give up some of your savings if you win, but these lawyers typically take cases on a contingency. So you won’t pay them anything unless they bring your tax bill down. Attorneys generally receive one-third to one-half of the amount of property tax you save the first year.
To find a pro, do an online search with the name of your town and the words “property tax” and “appeal.” You can check the lawyer's reputation at the Better Business Bureau’s website.
Use an Online Service to Appeal
Another way to fight your property tax bill is by using an online service such as ValueAppeal.com, which will comb its database to see if it’s likely that your home is overassessed. ValueAppeal does this detective work for free. Then, if you decide to appeal, it charges $99 to guide you through the process, including such steps as identifying comparable home sales in your area that will strengthen your case.
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For you cynics, I plugged in several addresses at ValueAppeal.com and the site said they were not overassessed. So I’m persuaded that this service doesn’t automatically encourage every user to appeal.
Going It Alone
Appealing your property tax assessment on your own is also entirely doable.
People who’ve done it tell me that you should expect to spend between five and 20 hours working up your case. After that, you’ll make your argument to the assessor either in writing or at a hearing.
The first step in appealing your property taxes by yourself is to ask your tax assessor’s office for a copy of the materials it used to determine your home’s value (to find the office, check your town government's website). This packet, often called a property worksheet, will include notes on your property and the list of recent local home sales that were used to calculate the assessed value of your house.
Scrutinize this packet, looking for a way to make one of the following three arguments that could bolster your case:
1. The assessor’s description of your house is wrong. If you uncover such an error, congratulations! You have a very good chance of winning your appeal, since facts are facts. Examples of this type of mistake include the assessor saying your house has more square footage than it actually does, or that you have five bedrooms when you have only four.
2. You just bought the house for less than its assessed value. If you purchased your house recently and the sale price was lower than the assessed price, that’s a strong argument in your favor, too.
3. The assessor compared your house to others that aren’t similar. This is the most complicated argument, but also the one that’s most commonly made.
Look at the houses on the assessor’s recent-sales list. Are they newer than yours? Much bigger? Recently remodeled? On streets that are much quieter than the noisy thoroughfare where you live?
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This is the one time you want your house to sound as pathetic as possible.
You’ll make the best case by proving that the homes on the assessor’s comparable list are much nicer than yours, and offering three to six others that are similar to yours but with assessments at least 10 percent lower.
To get comparable sales information, you can ask a real estate agent or use a website like Zillow.com, which lists the year a home was built, its square footage and its number of bedrooms as well as other details.
If you decide to use Zillow, don’t rely on the “Zestimate” the site assigns each property. This figure is theoretical and may not be accurate. Instead, look to the assessed property values on Zillow.
State Programs That Can Lower Your Property Taxes
Whether or not you appeal your property tax assessment, if you’re around 60, look into whether your state or county offers a property tax break based on age — often called a homestead exemption — or an income-based property tax break that is enhanced by age. Some of these provisions can save homeowners $1,000 or more.
Many states offer property tax relief for people older than 65. But in Maine the threshold is 62; in Washington, 61; and in Hawaii and Kansas, just 55. The states with age-related property tax breaks also have maximum income limits to qualify.
The easiest way to see which property tax breaks your state offers is by using the terrific Residential Property Tax Relief Programs online database managed by the George Washington University Institute of Public Policy, in cooperation with the Lincoln Institute of Land Policy.
After you enter your state and age, a customized table pops up. Bear in mind that the data is from 2010, so it’s possible the programs have changed slightly since then. To double-check, ask your state tax office.
The types of property tax relief vary as much as the age thresholds.
For example, Washington freezes assessments once its state’s homeowners turn 61; after that, assessed value of their homes can’t rise anymore. New York exempts from property taxes the first $62,200 worth of home value for residents who are 65 and older. And then there’s Tennessee, which sends annual rebate checks to qualifying homeowners age 65 and up.
No matter where you live, you must apply for the property tax benefit to receive it. Some states make homeowners reapply every year. To claim any break you deserve, get the proper form from your state or county tax office and send it in.
After all, why pay more taxes than necessary?