The Property Tax Gift that No One is Taking

I recently received a somewhat startling letter in the mail.  The county I live in wrote to notify me that they’ve determined that the fair market value of my home has increased an astonishing 25% in the last calendar year.  In general, I’m all for someone telling me that one of my assets has experienced outsized growth, but not so much when it’s the tax man giving me the “good” news.  

I wasn’t surprised that the property value increased.  Partially because it’s natural for property to appreciate but mostly because the city receives a sizable amount of its revenue from property taxes.  That said, the amount of the increase was a little jarring and would quickly wreak havoc on my annual budgets…if the increase was something more than a proposal.  The fact is, until the appeal period is over it’s a somewhat arbitrary number. 

Everyone knows this right?

Until recently, I assumed everyone appealed their property taxes on an annual basis.  Not only is the appeals process fairly straightforward but any number of attorneys are willing to do it on a contingency fee basis.  If we can all agree that money saved is money earned, than the opportunity to save on taxes with minimal to no effort seems like a no brainer.  However, according to the National Taxpayers Union, less than 5% of US households appeal their property taxes!  Moreover, an estimated 30-60% are clearly overassessed. 

Why is No One Appealing?

Why aren’t people appealing?  I conducted an informal poll and I found three main reasons.  Spoiler alert, all are quite lame.

First, is the confusing nature of the property tax formula.  Many jurisdictions have an overly complicated formula that can be more than a little intimidating.  In my county we use a market value for the property, a state equalizer, and a level of assessment to calculate the tax.  But the reality is, regardless of the formula used by your jurisdiction, they all hinge on the assessed value of the property.  The lower the assessment, the less you’ll pay.  When appealing an assessment, the best way to make your case is to present the assessor with comparable properties that sold for less than the value assigned to your property.  

Second, is the limited time given to appeal.  Appeals must occur during the appeal period, and for many counties that period is only open for a few short weeks a year.  If you blink, you’ll miss the opportunity.  That said, the appeal period is announced well in advance by the assessors office and the appeal can be done in the same day, so there’s no reason that time should be an issue.

Lastly, its our hatred of fees.  Every appeal period, I get a few dozen letters from billboard attorneys hawking their services for anywhere from 15-50% of the savings from the appeal.  I get it.  If I don’t want to pay fees for my index fund, why would I want to pay fees to an attorney to find a few comps when I could go to Zillow and do it myself?   The answer to this is, 1) if you’re anything like me, you won’t get around to doing it and you’ll miss the deadline; and 2) just as importantly, while you may find some serviceable comps, a good attorney with access to a good database will find the best comps.

Why Now?

As if saving money wasn’t enough of a reason.  The one saving grace for overpaying your property taxes was the SALT deduction.  Prior to the Tax Cut and Jobs Act, you were able to fully deduct any taxes paid to your state and local government including your property taxes.  Now, you still keep that deduction but you’re capped at $10,000.  For high income earners, their state income tax and property tax can easily be many multiples of this number making the SALT limitation incredibly punitive.  If you’ve never appealed your taxes before, this deduction has limited the damage; but with the new cap on this deduction, you’re losing a valuable offset.  

So, do yourself a favor and google “XXXX county assessment deadline”.  If you missed this years open period, calendar the dates for next year.  If you haven’t, go to your county assessors office and learn how to file an appeal or engage an attorney or tax expert to do the work for you.  I used a service last year and saved 18% over my prior years bill.  Here’s hoping for similar success this year!

-Woodstock

7 comments

  1. I would love to be able to lower my property tax, but I highly doubt the assessed value would be lowered. We moved into this house 2 years ago and before we moved I looked at the property tax info and assessments on many houses to get a better feel for assessed values. Properties in our county (aside from new constructions) haven’t been re-assessed in a long time, so the assessed values are generally far below the market value. I wouldn’t be able to find a single comp that would justify a reduction for our home’s assessed value. Now, when the county does reassess home values and ours goes up, I’ll be looking into this for sure.

    1. Doesn’t hurt to try. I’m in one of the fastest appreciating neighborhoods in the US and I bought my home for a steal, AND I’ve won my last three appeals.

  2. After reading this I cant believe I haven’t been doing it all along. I knew the property increased in value because of additions etc, but still if can not make it quite so high it would be even better. My property tax for my home is still fairly low so I can’t believe the savings will be as much as HCOL areas. For 7.67 acres, 2 homes (guest house about 1600 sq foot, main house 3150 sq feet) and 2 waterfalls on the property makes my property tax total $4050/yr.

  3. GREAT post. The SALT deduction is a huge issue when it comes to property taxes. Over 20,000,000 people making over $100,000 per year have been utilizing the SALT deduction on their income tax returns (Source: Zipappeal Analysis). Their average SALT claim was $12,300 – so that’s at least $2,300 of tax deductions that are lost. Depending on their county, all of these people that own homes should be filing their property tax appeals annually!! Anyway, thanks for the informative post – your site is great! Amish Shah, CEO Zipappeal

  4. I appealed my property taxes several years ago. I was living in a fixer upper and had building permits for the work I was doing. But when taxes came out, they had already assessed for a new kitchen and deck, even though I was living with only a subfloor and there was no plumbing installed. I made the appointment, appealed the amount using finished houses on my street as comps. The city reduced my taxed to an amount lower than the past year!

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