Property taxes are still on the upswing in many parts of the U.S. To help get a handle on your property taxes, here’s a look at what goes into determining your bill and a few ideas that may help to reduce it.

About property taxes

Property taxes are typically calculated using two factors:

1. The assessed value of your property (set by your local assessor)
2. Your local tax rate (set by schools, counties, fire departments, etc.)

Why does this matter? Even if your home’s value doesn’t change, your tax bill can go up if any of the taxing authorities raise their rates. And while setting the tax rates is usually a legislative process, establishing the value of your property often involves judgment.

Lower your property tax bill

• Understand and adhere to the calendar. Challenging the value of your property requires an understanding of the process and hitting the proper deadlines. If there’s an appeals process, be aware of it and ensure you meet their deadlines; otherwise, you may be out of luck for that year.
• Challenge your property’s assessed value. You have the right to appeal your property’s assessment by filing a formal appeal with your local assessor. If you can show your home assessment was more than its worth compared to similar homes, you might get your tax bill reduced. If you wish to appeal, you must act promptly. There are typically just a few weeks each year to appeal your assessment. So mark the date and gather evidence early if you plan to dispute it.
• Do your homework! Collect actual sales of similar properties that show a lower sales price, and be ready to defend the condition of your property if it is an older home. Assessors are quick to dismiss complainers with no facts to back them up.
• Claim all exemptions and eligible tax breaks. Contact your local assessor’s office to see what exemptions you can claim. Many states and counties offer breaks for veterans, individuals with disabilities, low-income households, older residents, and those residing in designated areas, such as historical districts or disaster zones.
• Compare local tax rates before making a purchase or relocating. Property taxes are determined locally by counties, cities, or school districts. This means two identical homes in nearby ZIP codes can have drastically different tax bills. Always check the local tax rate before buying or moving. Examine the history of property taxes in your target neighborhood to see how they have changed over the past several years. Then compare it with other homes in the area to ensure the rate increase is consistent.
• Calculate the tax impact of renovations before making a building decision. Adding a new deck or renovating your kitchen may increase your home’s assessed value, especially if the county discovers it through permit records or a property inspection. So even if you don’t sell your home, upgrades can mean a bigger tax bill. Some areas automatically reassess properties after building permits are issued. So always factor in long-term tax implications when upgrading your home.
• Review your lot details for unused land. Your property tax bill covers not only the value of your house, but also the value of your land. You may be able to adjust your bill if part of your property is unusable, like wetlands, steep slopes, or areas with easements. That is something you may want to ask your assessor.

What homeowners should know

One of the few taxes you can actively challenge and reduce is property taxes. But you must understand how the system works to do that. So, don’t just pay the bill without reviewing it. Understanding the details can often result in significant savings. Contact our RRBB advisors if you have any questions or for more information.