The taxes you pay on your house -- property taxes -- rank high on the list of the most hated taxes, and that has a lot to do with the fact that they rarely, if ever, go down.
Before we see why, let’s figure out how your city or county determines what you pay. It’s actually a very simple thing to do. Your city places a value on your house, called the assessed value. That value, say $200,000, is multiplied by the tax rate in your city, say $1.20 per $1,000 of value. When you do the math, you’ll see that your annual tax bill comes to $2,400. Of course, if you live in states such as New York, New Jersey, Illinois or New Hampshire, your property tax rate might be much higher.
To make matters worse, the National Taxpayers Union estimates that cities and counties have placed too high a value on as many as 60% of all houses and commercial buildings. Is your house one of them? If it is, there is something you can do about it.
Question The Details
First, find out what your city or county knows -- or thinks it knows -- about your house. Sometimes this information is on the city’s website. Sometimes it’s on a property tax card that you can ask to see at city hall. Either way, it can be very enlightening.
You can have a property assessor come to your home with the goal of lowering your house's assessed value. But this isn't as common as you'd hope. Assessors rarely, if ever, enter the houses on which they place values. The information they use often is based on the house’s original plans, old building permits, educated guesses and street-side observations.
If your property tax card is accurate, your house still may be overvalued. To determine that, go to your city’s website or to city hall and find the assessed value for similar houses on your street and in your neighborhood. Also compare the heated square footage, the number of bedrooms and bathrooms and the size of the lots. Check to see if other, similar houses have amenities and features that yours does not have, such as oversized garages, swimming pools or enclosed porches. It also might help to walk your neighborhood and pay close attention to houses that are similar to yours. As you gather this information, it may become clear that your house is or is not valued fairly compared with similar houses.
Hire Your Own Appraiser
If it’s not clear why your taxes are higher than your neighbors, you may want to hire an appraiser, who not only will appraise your house but will estimate the value of similar houses in your neighborhood. This may cost as much as $500, but at least you'll have peace of mind about whether your city has accurately valued your house.
If you or an appraiser determines the city has not done a good job, you can appeal to a real estate assessment board. Some have hearings that allow you to present your evidence, which may include having your appraiser testify. Some require homeowners to mail information to them. Only about 2% or 3% of homeowners take this step, but about 30% of them have the values of their houses lowered, so it might be worth your while to appeal.
While hiring an appraiser can result in the lowering of your assessed value, there is also the risk of backfire. For example, some assessors have told me it’s almost never a good idea to ask them to come to your house. Unless your house hasn’t been updated since the 1950s, the assessors who’ve been invited into houses say they almost always discover multiple upgrades that cause them to raise the value of your house. They also may realize that you didn’t get the necessary building permits for past improvements made to your house.
If you decide to do it anyway, make sure you’re with the assessor at all times. While he’s taking note of the new granite counters in the kitchen or the new built-in bookcase in the den that you forgot he would see, you can make sure he also sees the sagging roof and other deficiencies that might lower your house’s value. If an assessor is in your house, you can deny him access to certain rooms, but if you do, many cities have a policy that allows him to automatically assign the highest assessed value possible for the property.
This tip may seem too obvious to mention, but if you’re intent on keeping your tax bill down, don’t build. Any project that causes a contractor to get a building permit will cause the assessed value of your house to rise. That’s because the folks in the building permit office will send a copy of the permit to the assessor’s office, which might prompt a visit from an assessor. Either way, it will cause an increase in the assessed value.
Just about everyone wants a beautiful house, and just about no one wants to pay high property taxes. It can seem impossible to balance these two things.
But never assume your tax bill is set in stone. Now you know there are things you can do about it.