After purchasing a house, you grow accustomed to paying whatever tax bill your local government sends you. While you may assume that your bill is set in stone, your taxes can easily change.
The reality is that you can fight city hall or your county which puts the tax bill together. There are a few ways to get that bill lowered – and potentially save hundreds to thousands each year.
“It’s a big myth that you can’t get your tax bill lowered,” Pete Sepp, president of the National Taxpayers Union & NTU Foundation in Washington, D.C. “And that myth is exacerbated by so many people who just make a big monthly payment to their mortgage company that includes their property taxes.”
Sapp said most people never pay attention to what they really are paying in local property taxes. They first open up the tax bill, then realize that the mortgage company pays their tax bill – which, of course, they have been paying monthly with their mortgage payment, he adds.
“People never really question the assumptions that went into that bill in the first place that are reflected in their mortgage payments,” Sepp says.
It is estimated that up to 60 percent of properties are overcharged on the tax bills. Many times, it starts with the original information given to the city or county about the property.
Homes are usually assessed either by a system that compares your property to other local properties or by a replacement cost system.
With the comparable sales system, the assessors may see that homes in the same area sold for $120,000, so your home is assessed at that value.
But the assessors don’t take into account any specifics that could increase or decrease the value of your property.
“This is an example of inaccuracies or an over simplification,” Sepp says. “This is something you will be able to challenge by reviewing your property card.”
Sometimes, the information is available online. Other times, you will have to go to your local assessor’s office to get the information. It is public information, plus it is your property.
Sepp says here are a few of the first things to do to get your property taxes lowered:
Study your property tax card
This shows the size of the lot, room sizes, fixtures in the house, and other information about improvements or special features. Mistakes happen, and the assessor can make the corrections and possibly do a re-evaluation.
This can go in your favor and potentially lower your taxes.
Check comparables to lower taxes
Information about other homes assessments in the area are also available to the public – sometimes for a charge.
Sepp says there can be big discrepancies from one house to another. Just because someone has the same 3 bedroom home as you, they might also have a three-car garage and a swimming pool. Yet, you are paying the same tax bill without those luxuries.
Make informal tax appeal
If you find that your assessment is unfair, talk with the assessor’s office about the information you have found. If the assessor doesn’t agree, then it’s time to file your formal appeal. You might want to actually attend an appeals board hearing before your case is heard.
Just remember that every state (and jurisdiction) has different rules about real estate taxes. Plus, the rates are quite different.
New Jersey is the highest with 2.29 percent while the lowest is Hawaii with .28 percent. That means on the same $176,000 house, the taxes would be $4,026 in the Garden State, but only $489 in the Aloha State, according to Wallethub.com.
Some other ways to drop your tax bill is through exemptions that you might be qualified for. Here is a list of different qualifications to get a cut or even eliminate all of your real estate taxes:
- Seniors — There are many states that offer reductions in property taxes. For instance, the state of Washington reduces your taxes the year after you are 61, according to HouseLogic.com, a homeowners’ site published by the NATIONAL ASSOCIATION OF REALTORS®.
- Renovations — Some states give you a property tax break for renovating. In Bismarck, N.D., you can earn a five-year exemption from paying property taxes on the value you added to your home with the remodeling if your home has to be 25 years or older.
- Veterans — Nationwide, states are lessening the financial burden on qualified disabled veterans and veterans or their widowed spouses when it comes to property taxes. Some states waive all the taxes for disabled veterans. Check with your local taxing authority on what benefits can come your way as a veteran.
- Renewable Energy Systems — Some states don’t include the value of your green improvements from your real estate assessment, such as geothermal heat pumps and solar panels. Look for what tax breaks you can get in your local jurisdiction on the Database of State Incentives for Renewables & Efficiency.
- Homestead — Homestead can mean a lot of things, such as getting a tax break for a if it is your primary residence, or getting a drop in your tax bill because of your income level. Check with your local assessment office on the type of homestead exemptions available.