There are ways to minimize the income and sales tax you pay each year. Property taxes are tougher. Based on your home's assessed value, property taxes generally feed a local government's general account, but they can also pay for specific services offered in your neighborhood, such as schools and police, or, unfortunately, deficits run by your local government. In 2009, 25% of cities raised property taxes to offset falling tax revenues, according to the National League of Cities.
Here are some steps you can take to cut down your property tax bill:
Make sure your assessment is accurate. A single-car garage that gets confused for a double-car garage could lead to an unnecessarily higher tax bill. So it's important to make sure your property's assessment value, which is determined by your state or local municipality and is typically lower than the actual market value of the home, is up to date and accurate.
- Review your property card. Online or at your local assessor's office, you can learn how the value of your home is being calculated. Make sure square footage measurements are accurate, along with the age of the home and the number of bathrooms and bedrooms.
- Compare. Your home's assessed value, in most cases, is highly correlated to those of similar homes in the neighborhood. If your house is priced more expensively than comparable homes in the neighborhood, you could be paying a bigger share of property taxes than you should be. If you think your home assessment seems high, you can challenge the assessment.
- Know changing values. Look at how your property value has changed over the years. Some cities are quick to adjust assessment values when property values are increasing, but not so quick to do so when values are declining. Be sure your assessed value accurately reflects any drop in property values in your area.
- Get it appraised. If you are having trouble estimating the value of an extra bathroom or bedroom, you might want to hire a private property appraiser. But first be sure your state or local assessor accepts private appraisals.
Appeal the assessment. In most towns at least 20% of homeowners who appeal a home assessment get a reduction.
- Learn the ropes. Call your town assessor to find out the protocol. Some municipalities only accept appeals a few months out of the year. The process could be as simple as filling out a form, but, in some cases, you may have to present your case to a council.
- Know the history. Pull together any documents that show the current condition and age of your home. This includes taking pictures to show the condition of the house, gathering floor plans to prove square footage and tracking down receipts for home improvements.
- Get it in writing. Make sure to write a letter that explains the basis of your argument. Even if your municipality doesn't require it, you should document your request and keep copies of all supporting materials.
- Get help. Some towns have a more complicated process than others. Professional assessment challengers normally require an up-front fee or charge a percentage of the reduction achieved. Online services are also available with prices starting at $40 through EasyTaxFix.com and LowerMyAssessment.com.
Rezone your property. Outdated zoning could lead to higher property taxes.
- Know what you hold. In some areas, property tax rates are higher for commercial property compared to residential property and developed property compared to undeveloped property. Only consider rezoning if you're a long term owner because the process is difficult to undo.
- Stay up to date. Some properties are zoned part residential and part commercial. If a business is no longer operating on the property, rezoning the lot to residential only could lead to lower taxes.
- Split up. If you have a lot of own undeveloped land on your current plot, you can consider splitting the property into two lots and rezoning the new lot as undeveloped.
- Be a good neighbor. Get feedback from your neighbors before proceeding with a rezoning request. Strong neighborhood opposition could make it difficult for your request to be approved.
What not to do when appealing your assessment or trying to rezone.
- Don't get emotional. Keep your argument factual and to the point. If you have to make a presentation, try not to use all of the time you're allotted. You'll probably be one of many appeals and you want to keep your case simple.
- Don't ignore your property value. Even if you're not looking to sell anytime soon or if your property tax bill hasn't changed dramatically, you could miss out on some tax breaks if you don't monitor your assessed value.
- Don't spend on extravagant home improvements. Home improvements are necessary from time to time, but be aware that large renovation products, especially home additions that increase the square footage of a home, can increase your property value and your tax bill.