Wealthy people invest their money in things that grow in value over time. Most people are familiar with this. What you might miss is that they do the same thing with their time. They spend their time and their focus on things that have a big impact over the long term.
If you own a house, some land, or real estate, giving your property tax bill a closer look can be one of those things. If you don’t own property now, check back here when you do.
Don’t think of this exercise as a way to save money on your tax assessment. Think of it as a way to make sure you’re not paying too much. This is a good investment of your time – if it turns out your bill is too high and they correct it, this correction affects future years and future tax bills.
Step One: Pay Your Bill On Time
This might seem counter intuitive. There are other places where you can delay paying if your bill is in dispute, but Uncle Sam doesn’t see it that way. As far as the bean counters are concerned, you still have to pay your tax bill on time or you’re going to get slammed with fines.
The good news is that if you pay your bill and file an appeal, they’ll refund you any money that is determined to be an over payment. You’re dealing with a bureaucracy and bureaucracies work slow — this is an exercise in patience. Save yourself the headache – pay your bill and get ready to play the long game.
Step Two: Learn The Rules Where You Live
The process is generally similar wherever you live in the country, but there are regional differences.
The most important difference is when your deadlines are. Some jurisdictions give you 90 days to appeal, some only give you 30. Look up your region’s tax assessor and look for this information on their website. Or call them up. Ask them for information about how they arrived at the assessment amount and ask them for details about the appeal process.
Dealing with bureaucracies can be a slow game, but the upside is that they’re generally very open about informing you how to play the game. Ask lots of questions. If you’ve got a strong case, playing by their rules speeds up the process.
Step Three: How Did They Arrive At Your Bill?
In theory the way to land on a dollar amount is to send a qualified person to perform a property assessment. They would then take that property value and multiply it by the tax rate.
This is expensive and time consuming, so the tax assessors may use other methods to arrive at a figure. What you need to do is find out what method they used. If your property wasn’t visited by an assessor, you might be able to find some room to argue.
Here’s where to start looking:
Are Their Records Accurate? Humans make mistakes. This is an easy check. If they think your building has more rooms than it does, or it is larger than it actually is, that is an easy thing for you to prove.
Are There Similar Properties Nearby? If you own a house in a neighborhood where everything looks nearly identical, chances are your tax assessment should be nearly identical. If it turns out your neighbors are paying less, chances are you should be paying less – ask the assessor why you’re being treated differently.
Do You Have Problems They Don’t See? Property value can be negatively affected by all sorts of factors. Perhaps there’s problems with the basement/foundation they don’t know about. You’re looking for factors that would be a turnoff a prospective buyer. Factors that you can document.
It’s also worth taking a look into any tax shields unique to your area or to your situation.
Tax Breaks. Look for these on the department of taxation’s website. You could consider asking a CPA about this as well. Some states allow for a ‘homestead exemption credit’ if the property is your primary residence. There’s often also tax credits set up for Veterans, Seniors, or persons living with a disability. Read up and see if any tax breaks apply to you.
If you think you’ve got a legitimate reason to challenge the assessment, then move onto the next step.
Step 4: Make Your Case
The appeal starts with an informal hearing. The smart move is to make a compelling case and get it solved here. You might even get the appeal approved on the spot. If not, you can take it to a formal hearing where you present to a board. After that you can take your appeal to the state level.
Read all the fine print and make sure you’re following their rules. Bring copies of all the supporting information and make them look presentable. Depending on your appeal, this can include bills of sale, repair estimates, photographs, and/or listings of properties similar to yours.
Make it easy for them to say ‘yes’ and hard to say ‘no.’
Remember, this can be a slow process but patience and persistence pays. It’s a pain in the ass having to wait months for a hearing, but it’s worth it if it keeps money in your pocket. You go to this trouble once, and benefit from it for the rest of the years you own the property.
You can hire law firms to do all this for you, but be prepared to pay through the nose for it. Go this route if you’re very strapped for time or if you’re disputing multiple property assessments. Invest your time and your focus now to avoid spending too much in the long term.