Buying a home is a major investment in time and money. One of the many annual costs of owning a home is property tax. The taxes collected on your property help fund local schools, government, and a number of other local and federal programs. However, you do not have to overpay to be honoring your civic duty by paying taxes. There are a number of things that can be done to lower your taxes and help keep the cost of owning a home down.
The most important thing you can do is get an accurate assessment of the value of your home. Each year a Tax Assessor will come to your house and evaluate the value of your home. The purpose of this evaluation is to see what changes have taken place on your property (such as home improvements, new construction, deterioration or restoration of the home, etc.), and surrounding properties.
The Assessor will also take into consideration the “Fair Market Value” of any homes recently sold in your area, the estimated cost to replace your property, and how much income value your property would have if leased or sold. The purpose of the assessment isn’t necessary to raise your taxes but to help determine the true value of your property as compared to those in the surrounding area. Once a value is determined, your annual property taxes will be a percentage of that value.
Tax Assessor cannot determine the rate of taxation, just the value of your house. Town, county, schools, and special districts determine your annual property tax rate. You cannot contest the rate of taxation with the assessor.
Because so much personal discretion is used by each individual Tax Assessor, there have been many avenues set up for home owners to contest the assessed value of their homes and seek a lower value, which then results in lower taxes. The simplest way to contest your Tax Assessment is to speak with the person who did the assessment.
You can argue that your home was over-valued and request that the estimated value be reduced. If you do not achieve the desired results from talking with your Tax Assessor, then you can request information on administrative or judicial review procedures. These will vary from state to state and from each county within a state. Be prepared to back up your reasons for wanting your assessment lowered with factual information.
In keeping with getting an accurate assessment of your home, it’s very important to be up to date on the market value of properties in the surrounding area. Talk to your neighbors. Find out what their homes are valued at, and how much they are paying in taxes each year. Talk to people who have just bought or sold a house in your neighborhood to determine the true market value of the area. You can also speak with local realtors to see what homes are really selling for.
If you just bought a home, the estimate may be slightly inflated. Most sellers want a higher estimate before they sell in an effort to get more money for the house. If you’ve been in your home for a number of years, you may be unaware of the rise or fall in property value in your area. If your neighbor’s house is similar to your own and valued at a much lower cost you would have very good grounds to contest the value of your home and reduce the cost of its taxable value.
Other important avenues to explore are any tax exemptions you may be eligible for. For example, homeowners who own and live in their primary dwelling can use The Homestead Act to literally take thousands of dollars off their estimated property value thereby saving hundreds in taxes. Contact your local Tax Assessment office for exemptions available in your area.
If you have the time and want to put in the effort you can protest the rate of local taxes at their source: the people and organizations who create tax rates. Go to school board meetings, county meetings, and other committee meetings created to determine the tax rate in your county. By participating in these events, and voicing your concerns as a citizen you will be helping determine the route your county will take in determining the next years tax rate.
Last but not least, if you have a FHA mortgage loan be sure your lender is not overcharging you when they collect for yearly taxes. With a conventional loan this isn’t an issue because the homeowner is personally responsible for the payment of taxes. With an FHA loan, the lender estimates the yearly taxes due and breaks that amount down into 12 payments included as part of your monthly mortgage payment.
If this estimate is off, you could be paying more than you need to each year. If you feel that your mortgage company over charged you, file a complaint with them and you will receive reimbursement for any money owed to you.