One of the more confusing topics for new homeowners can be property taxes, how they are calculated, and what to do if you feel the appraised value is too high.
Let’s start with understanding what property tax is. Property tax is based on the assessed value of your property. This tax pays for local government projects like schools, libraries, fire stations, etc.
Your home’s value is assessed by your local tax assessors office.
You will first receive your assessment, and the bill will follow. The assessor will usually arrive at your value based on one of the following three:
- Comparison of Properties: The assessor will compare your property to that of the properties that have sold in your area. He will make adjustments as needed, for improvements made.
- Calculation of Cost to Reproduce: The assessor will calculate what it would cost to build your home. That would include labor and materials.
- Income Producing Calculation: The assessor would calculate how much rent you would receive if you are using your property for a commercial reason, and rented it out. The value would be found on how much income you would make.
What Do You Owe?
Your assessed property value is then multiplied by your local tax rate. Use this calculator to see the amount of property tax you will be responsible for by plugging in your county and your property value.
How Do You Pay?
The tax owed can be included in your monthly mortgage payments, in one payment, or in multiples to your local government who issued the bill.
What do you do if you feel your property value was too high and now you owe more tax that you expected?
- Make sure all the data on your assessment is correct: Number of bedrooms, number of bathrooms, lot size, etc.
- Get the comps: Ask your realtor to give to three to five comps to show that your house was over valued. You can also look online for houses that would compare to yours with a site like Zillow or realtor.com. Once you have the comps, see what those properties were assessed at. That information is usually public record, and if not, your realtor can help. If the comps values are lower, you can say yours is too high.
- Call to make your case: With your research in hand, call your local assessors office and be ready to fill out any forms required, paying attention to deadlines. Also be prepared to wait a few months for the decision.
- If the review of your claim is unsuccessful, you can make an appeal in front of an independent board. That decision could take a year to be made. Also be aware that there is a slight chance that they would raise your assessed value after further investigating your case, and that the decrease in property value would hurt your future sale if you’re planning to put your house on the market.