Homeowners love rising home values -- until they receive their annual property tax bill. It's one of the bittersweet realities of homeownership in a hot real estate market.
If your tax bill has you singing the blues, it may be time to consider whether the property tax assessment is accurate, and if not, how to appeal it.
Property tax appeals were especially popular among homeowners just after the real estate collapse of 2008 due to sharp declines in home values throughout the U.S. In today's market, after a sharp increase in property values over the last several years, more homeowners may be questioning their tax assessment for opposite reasons.
As well, home values may also be starting to soften in some areas as high interest rates and challenging affordability conditions slow the housing market.
Related: Track changes in home values in more than 400 metro areas
Regardless of the market, the reality is that not all tax assessors keep up with trends, and some homes may be over-valued and thus over-taxed.
According to the National Taxpayers Union Foundation, as many as 60 percent of properties are overvalued by tax assessors. Despite the possibility of savings thousands of dollars, on average only two percent of homeowners appeal their assessments.
Should you appeal your property tax assessment?
Be sure to take advantage of all homeowner tax incentives that you can. Then take a close look at your assessed home value, to be sure you aren't overpaying. Understanding your tax assessment, as well as how to challenge it is a great place to start.
The appeal is the first step in lowering your taxes. However, before you march in and bang your fists on your local tax assessor's desk, here some important considerations.
1. An appeal can take months. The property tax appeals process can take place at multiple levels, such as a written form or request for a review, a citizens' panel, an assessment appeals board, or other forums. Each level has its own rules, guidelines and deadlines, set by law or the tax authority.
In some places, homeowners receive a final resolution for an appeal within a few months. Elsewhere, an appeal can take a year or longer. How long the entire process takes depends on local resources. But there are things you can do to speed up the process.
2. Property assessment letters show critical details. Your local government periodically assesses all state and local taxes for real estate. When your tax assessment arrives in the mail, it should list all the relevant information that determines the assessed value for your property. Your assessment may be accurate, or it could be wrong.
If your assessor has your home down for five bedrooms, but you only have four, you can correct this error by requesting a property visit or submitting drawings. Since less living space means lower taxes, verify accuracy in terms of square footage, rooms and amenities.
According to Bruce Woodzell, president of the International Association of Assessing Officers in Charlottesville, VA, "Information speaks volumes. If you have hard facts, if you have sales data, and if you have all your information right, it really helps."
3. Comps trump other data. Gather data about sales of homes that are comparable to yours. These "comps" should be located in your area, approximately the same size as your home and have similar features. The data points for each comp might include the address, date of sale, sales price, square footage, and amenities. Pictures may also be helpful.
The tax assessment authority's website or bricks-and-mortar office might be the best place to find comps. A website operated by a local multiple-listing service (MLS) also may be a good resource.
Keep in mind that websites may be incomplete or contain outdated or erroneous information. A search of several databases, based on your home's parameters, should turn up useful results.
How to lower property taxes on your home
Many states reward homeowners for an automatic "homestead" exemption for simply living in their home and not renting it out.
According to the Department of Revenue, "Generally, a homeowner is entitled to a homestead exemption on their home and land underneath provided the home was owned by the homeowner and was their legal residence as of January 1 of the taxable year."
Other exemptions may be available to seniors, veterans and the disabled. To find out if you qualify, check out your assessor's website or call them.
Some homeowners may want to consider enlisting the help of a local real estate professional, or even an appraiser. These professionals can put together a report that includes an expert opinion of your property's value.
Something else to consider is: if you're unhappy with your tax bill, there's a good chance that your neighbors share your frustrations. A great place to start is by talking to them.
SALT limitations
There were several IRS tax deductions that didn't survive the tax reform process a few years back and so are no longer available. However, the deduction for state and local taxes,SALT, which includes the property tax deduction, did make it through.
However, the Tax Cuts and Jobs Act made one big change to the deduction for state and local taxes, limiting the amount to a total of $10,000 you're able to deduct.
New limits on deductions for state and local taxes may have the greatest affect on those with high incomes who live in high-tax states such as New York, New Jersey, and California. All the more reason to be sure your property tax burden is fair and appropriate.
Lowering your mortgage costs
If you have an adjustable rate mortgage, the potential for a change in your mortgage rate coinciding with an increase in your property tax assessment can be a source of concern. With many Americans including property taxes and insurance in their mortgage payment, also known as escrowing, lowering property taxes can be a great way to reduce monthly expenses.
Even if your taxes aren't included in your monthly mortgage payment, with the possibility of saving hundreds or even thousands per year, it can make sense to appeal.
This article was updated by Craig Berry.
