If you’ve owned a home long enough, you’ve probably learned that being a homeowner brings many hidden costs. Chances are, when it comes to property taxes, whether it’s your first or your fifth home, you have some questions.
Many homeowners pay their property taxes blindly without knowing how their bill was calculated. Especially since most mortgage companies pay on behalf of the homeowner by including property tax payments in monthly billing statements, this leaves homeowners not as involved in the process.
With mortgage rates at their highest since 2008 and home prices increasing by double-digit percentages, homeowners are looking for ways to lower their costs. When home prices go up, property taxes aren’t far behind. We’ve included some secrets to savings that will bring better awareness to the process and help make your bill more affordable.
Secret #1 – Know Your Rights as a Homeowner
You have rights as a homeowner that help you make informed decisions. Homeowners have the right to:
- Equal and uniform taxation
- Voice their opinions at open public hearings
- Fair treatment by the appraisal and tax office
- Notice of property value increases, proposed tax rates, and estimated tax amounts
Each state handles tax and assessment information differently, but homeowners are typically sent an annual notice listing the proposed property taxes, value assessment, and dates and times of public hearings on a tentative budget. While each state uses different terminology for this document, it is often referred to as a Truth in Millage (TRIM), Notice of Assessment (NAV), or Notice of Property Value (NOPV). The frequency at which taxing authorities readjust their tax rates varies by state. Some change them annually, while others do so less regularly, such as once every three to five years.
Access to Public Hearings
Homeowners are entitled to a voice in decisions that affect a home’s local tax rate. Taxing authorities are expected to make every reasonable effort to provide notification of public hearings to taxpayers. During the hearing, a tentative budget is amended as it sees fit to ensure all costs are covered for important local services, a final budget is adopted, and a tax rate is decided. Homeowners may attend these hearings to make comments and ask questions. Public opinion can make a big difference, and a homeowner’s influence on public decisions can go a long way.
Secret #2: Appeal Your Home’s Assessed Value
If you feel that you are paying too much compared to similar properties in your area, you may meet with your property appraiser to discuss your concerns or petition the county value adjustment board to appeal your home’s assessed value. National Taxpayers Union Foundation estimates that 30%-60% of properties in the U.S. are over-assessed. Sadly, less than 5 percent of homeowners will challenge their value due to either being unfamiliar with the process or feeling intimidated by confronting the county government.
Here are a few things to keep in mind:
- An attorney or Realtor is not required, although professional guidance is recommended
- You can attend an appeals board hearing beforehand to get a feel for the process.
- Submitting an appeal is simply a request for review
- There are no consequences for appealing
Sometimes, there are errors, and you have a right to question them. Your property taxes are always worth investigating. Not only will you be paying more taxes if you don’t, but it could make your house harder to sell in the long run if taxes remain unreasonable. While you aren’t really changing your property taxes through this process, by challenging your home assessment, you are partially determining the amount of property taxes you pay. There may be a small window to dispute any discrepancies, so you will want to start the process as soon as possible
Four steps to submit an appeal:
- Research the appeal deadline in your state and fill out the appeal application
- Check the accuracy of the assessor’s math and description of your property
- Locate at least five comparable properties
- Compare your property’s assessment against the assessments of the comparables
The outcome of your appeal may be determined at your hearing or mailed as a written decision. If you aren’t satisfied with the ruling and believe you have proof your property taxes are not fairly assessed, you can take it higher and appeal to your state’s appraiser or the Superior Court. At this point, it is recommended to hire an attorney.
Secret #3: Take Advantage of Exemptions
Two important factors calculate property taxes:
- Municipality’s tax rate
- Most recent assessment value of your property – Just value minus any deductions
By receiving a property tax exemption, you are limiting the property value you have to pay taxes on, thus, reducing the final billed amount. Exemptions are not automatic and must be applied for before a specified deadline.
How to receive exemptions:
- Explore your local options
- Check your eligibility
- Apply before the tax authority’s deadline
Homestead exemption is the most common exemption that can be applied to a property. Each area has its own criteria to qualify for homestead exemption, but typically, it offers financial protection for homeowners who reside on their property full time. Some states tie the homestead exemption to age, income, or other criteria. Let’s say that your property’s value is $250,000, and you receive a $50,000 homestead exemption. Your tax rate will be calculated based on $200,000 instead of $250,000.
In addition to a homestead exemption, a senior exemption provides relief to homeowners typically over the age of 65. This exemption requirement may sometimes be combined with homestead exemption. For example, in Ohio, a homeowner must be over the age of 65 to qualify for homestead exemption. Additionally, this exemption may come with various income restrictions and residency requirements.
There are different types of exemptions available to veterans and their families that range anywhere from a fixed amount discount to a 100% exemption. These may apply for:
- Disabled veterans
- Deployed service members
- Surviving spouses
You can qualify for and receive more than one exemption. Hypothetically, a 65-year-old disabled veteran living in a primary residence in Florida can claim three types of exemptions; veteran, senior, and homestead. You may be surprised as to what your county offers for exemptions. Other exemptions include:
- Energy Incentives
Did you know? Hawaii has two unique exemptions: Leprosy exemption – an exemption of $15,000 in Hawaii county and a “Safe Room” exemption in Kauai County.
Secret #4: Avoid Making Significant Structural Changes
The role of an appraiser is to maintain a database for every piece of real estate in a taxing district and track its value. Inspections, building permits, tips from neighbors, and comparable sale prices are the primary sources on which the appraiser bases their calculations. Reassessments can be triggered by remodeling projects, including:
- Adding a pool
- Updating your kitchen
- Finishing a basement
Find out how often your state reassesses properties and wait until afterward to update and modernize your home to minimize value increases.
Limit Curb Appeal
In addition to limiting structural changes, limiting curb appeal is also a good idea. The assessor’s field appraisers may just drive around, noticing exterior changes and basing the assessment on what they see outside. There is a certain level of subjectivity based on the strict guidelines appraisers use when assessing homes so that nicer-looking homes may receive high assessed values.
Secret #5: Take Advantage of Installment Payment Plans
While paying in installments may not technically lower your tax bill, it can lessen the burden by splitting up your payments over time. This is especially significant for homeowners who have paid off their mortgage or do not have a mortgage. Some states already bill their taxes in installments, but they may allow homeowners to split it into as many as quarterly or monthly installments. In Milwaukee, Wisconsin, homeowners can pay property taxes in interest-free monthly installments without submitting an application.
States with installment plans include:
There is typically a minimum tax amount or property value requirement in order to qualify for an installment plan. For example, in the state of Florida, the estimated tax due must be $100 or more. Additionally, while a county or town may not offer installment plans, additional taxing authorities may. Check with your local government to see if you can you are able to work out a payment plan and when the deadline is to apply.
- Properties can be subject to steep increases in value and tax rates which affect property tax bills
- Homeowners have the right to question their taxes and stay informed of government decisions
- Taking advantage of exemptions and limiting major structural changes can lower the costs of property taxes
- The burden of paying property taxes can be limited by paying in installments
Your property taxes don’t have to be set in stone. There are ways to reduce your costs with some research, staying up to date and involved with the process, and understanding your area’s resources. As a homeowner, you can play a major role in how your taxes are calculated.