What is a property tax assessment?
The cost of home ownership includes a property tax assessment. A few states and most local jurisdictions levy a tax based on the value of private property.
It’s no small article: Property taxes accounted for nearly a third of all state and local tax revenue in 2016, the most recent data available, according to the Tax Foundation, a nonprofit think tank .
Here’s how your property tax assessment is determined and what to do if you think you’re overpaying.
How a property tax assessment is calculated
The value of your home can be determined for tax purposes by the most recent purchase price or by an overall appraisal of a neighborhood’s estimated property values. This value is then multiplied by a percentage, often called a mileage, to calculate your taxes owed. Depending on the condition, property values may be revised annually, or much less frequently.
“In some states, in theory, they haven’t reassessed since 1967. They take that value and sort of extrapolate it for inflation or this, that and the other,” says John A. Cocklereece Jr., attorney at Bell Davis & Pitt in Winston-Salem, North Carolina.
When tax assessments are not adjusted frequently, “values can get out of hand much faster and stay that way for much longer,” he adds. Of course, this can work for you – or against you.
It may take a trip to your tax assessor’s office to compare the assessed tax value of your home with nearly identical properties nearby to see if your home is fairly assessed.
What to do when your tax assessment is wrong
As property values increase over time, appraisals and tax bills can swell. To keep that annual pain in the wallet from spiraling out of control, know when to appeal your tax notice, as even jurisdictions that reassess stocks can often be wrong.
“It absolutely can happen,” says Debra Bawcom, senior property tax consultant at Texas Protax in Austin. Your property could be misjudged if a jurisdiction has documented the wrong number of bedrooms, bathrooms, or square footage in your home, she adds.
“If home values rise where you live, property tax assessments should be canceled.“
Debra Bawcom, Senior Property Tax Advisor
If you think there is an error in your assessment, the first step is to call your local tax assessor and explain your concerns. If this conversation convinces you that a call is worthwhile, ask what the process is.
Many jurisdictions limit the hearing of appeals to a period after the issuance of new tax notices.
Information you may need to collect in your effort to win a call may include:
An independent appraisal of your home and property.
Original construction plans.
Comparable recent sale prices on neighboring houses similar to yours.
Yes house values increase where you live, property tax assessments should be canceled, Bawcom says. Otherwise, you are hit with an automatic increase in the tax bill. A one-on-one call can help, but you’ll need to rally support from the community for a decrease in the mileage rate.
You may be eligible for a property tax freeze
In some states, elderly homeowners or low to moderate income residents may be eligible for property tax freeze, capping property tax or future rate increases. And most tax authorities grant a “homestead exemption” – a tax rebate if the property is your primary residence.