Property Tax Issues- THE 2010 Theme

As I have written earlier about 2010 being THE year to appeal property taxes (see blog entries Video on Property Taxes and As Home Values Decline Property Taxes Should Have) I failed to mention a key issue allowing property owners to appeal property taxes even if the assessed value is less than market value.  That is the principle of equalization.  I also did not emphasize how important it is that property owners have applied for all of the tax exemptions they qualify for to assist in reducing the property tax burden.

In dealing with property taxes and process of appealing them, several definitions are needed to understand the jargon of the property tax world.

The tax rate is the tax amount per level of assessed value.

The effective tax rate is calculated by dividing the annual property taxes by the market value of the property.

The principle of equalization states that regardless of property value, properties with equal values should have equal property tax burdens.

The assessment level is the percentage of the property that is subject to taxation.

Assessment levels are usually defined by legislation. An exemption is property (or a portion of the property) that is not subject to taxation.  Many states have exemptions’ that reduce taxes for certain groups of individuals and property types.  A common one in the homestead exemption that allows homeowners a tax break on a portion of their primary dwelling.  Other common ones in some states  include elderly exemptions (limiting property tax increases for those 65 and older), agricultural use exemptions (valuing property at the value of income it produces if used for agriculture rather than market value, and open space exemptions giving tax breaks to owners for not building and developing their properties.  Be aware, however, that some exemptions, while reducing taxes for years in which the property qualifying, may be due if and when the property sells or the exemption no longer qualifies.  Check with your local real estate professionals for clarification in your market.

Fractional assessment is an assessment rate of less than 100 percent (also usually specified by law).

Assessed values can be appealed typically at the annual appraisal review hearings (each state and local jurisdiction has their own specific rules in how and when to appeal property taxes).  Tax rates can be appealed at the ballot box by voting out those politicians that continue to overspend which drives up the tax rate.  (In some states and jurisdictions, tax rates are capped by law).

So how does the principle of equalization work? Assume for example, your home is worth $200,000 but the assessed value is $180,000.  Should you appeal you assessed value?   The answer depends on how much similar homes are assessed in your neighborhood.  If for example, there are several homes of similar quality, size, condition and amenities as your property assessed for less than yours, then you should appeal invoking the principle of equalization.

As I stated earlier, this is the time to aggresively appeal your assessed value by the tax appraiser. To appeal the tax rate, go to the ballot box and elect leaders that control spending.

Homeowners balk as property tax bills stay high – USA Today

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