Articles to Learn From

How to Slash Your Property Tax

Smart Money

by Lisa Scherzer  

Updated on July 9, 2009.

Want to lower your property tax bill? Consider seeking a reassessment.

The idea is simple. Property taxes are typically calculated based on an official assessment of your home’s value. If you can challenge that valuation – and these days, plenty of homes are worth less than their peak value – you’ve got a shot at shaving money off your tax bill.

With property taxes on the rise in small pockets across the country, a reassessment could be a particularly attractive option. In May, legislators in Macomb County, Mich., narrowly passed the first county property tax increase in more than four decades. The county had little choice because it wanted to close its 2009 deficit, says Phil Frame, a spokesman for Macomb County. And homeowners in Palm Beach County, Fla., may have to gird themselves for a 15% property tax hike later this year. The county is set to hold a public hearing next week to discuss the proposed tax.

Squeezed by foreclosures and falling revenues, many local governments are facing unprecedented budget shortfalls. To fill some of the gap, more municipalities are raising property taxes – in addition to cutting benefits and freezing salaries. In fact, about 18% of counties whose fiscal year begins between January and June increased property taxes to address revenue shortfalls, according to a survey last month by the National Association of Counties, a group that represents county governments.

“They’re trying to balance their budgets and trying to realize close to the kind of revenue they had been getting” in previous years, says Jacqueline Byers, director of research at the National Association of Counties.

Homeowners would have a hard time fighting the local government on such increases, but there are ways to reduce the impact of the hit. If your assessment is based on a higher valuation from several years ago – say, before 2005, the height of the real estate boom – it may be a good time to get it reassessed, says Gary Painter, director of research at the University of Southern California’s Lusk Center for Real Estate. The end result could save you hundreds of dollars a year.

Even if you’re considering selling your home in the next year or so, it’s worth trying to get a reassessment. If you’re successful you can use the lowered property tax rate as a selling tool, says Sid Davis, a real estate broker in Farmington, Utah. If a home buyer has narrowed their choice down to two similar homes in the same town, the one with the lower tax rate will tip the scales, he says.

However, this move isn't right for everyone. If you decide to hire a lawyer or property tax consultant to help you, for example, you could lose much of the savings you'd otherwise reap to their fees. Here are a few things to consider before seeking a reassessment:
Your Town's Methodology

While some municipalities revalue properties annually, others do so every five years, says Sharon McCabe, associate director of the Graaskamp Center for Real Estate at the University of Wisconsin. There's also wide variation in how towns assess properties. Homeowners should visit their assessor's office or check their web site for information about when assessments can be done, what period they cover, and how and when homeowners can appeal those decisions.
You Can Do It Yourself

You may get mailed solicitations from realtors or attorneys offering to help lower your property taxes by filing for a reassessment. But most homeowners can manage the appeal process on their own, says Tara-Nicholle Nelson, a real estate broker.

Lawyers and consultants typically charge a percentage of your first year's tax reduction -- sometimes as much as 50%. For a fraction of the price, you can buy a property tax-reduction kit that guides you through the process from The American Homeowners Association or the National Taxpayers Union. The cost: $29.95 and $6.95, respectively. (The AHA's kit is a bit more comprehensive.)
Check for Mistakes

Mistakes on property assessment records often mean homeowners are taxed at higher rates than they should be. The record might say, for instance, that your lot is one acre when it's three-quarters of an acre, or your house has four bathrooms when it has three.

Pete Sepp, spokesman for the nonprofit group National Taxpayers Union, estimates that the inaccuracy rate on home assessments is between 30% and 50%, depending on region. "That could include very minor inaccuracies, but the statistics still warrant people to take a look to see if there are potential savings," he says. If there's a flaw, you might be able to easily correct it in the assessor's office and avoid a long challenge process.
Check Out Similar Sales

Towns typically make assessments based on market value. But sometimes those figures aren't very realistic. If you don't think you can sell your home at the value your town pegs, find out what comparable homes in your area have been selling for, says McCabe. That means comparable in most ways: in the same school district, same number of bedrooms and bathrooms, same lot size. For example, if your three-bedroom house is currently assessed at $450,000, you need to show that similar three-bedroom homes in your neighborhood sold recently for less than that.

Just keep in mind that you may not know the special circumstances that affect individual sales. If, for instance, a nearby house recently sold for a much lower price than what yours is valued at, it could be because it just had a flood in the basement.

Also, some states, including Texas and Utah, are "nondisclosure states," which means their home sale prices are not matters of public record. If you're in a nondisclosure state, another option for finding sale prices is to ask a local realtor for sales information.