Watch out for local deadlines on when to file an appeal with your tax assessor’s office
Some states, such as Florida, require that properties be reassessed each year. THEPALMER / GETTY IMAGES
If a sudden turn in the local housing market has you fretting about the value of your own home, it’s time to take a break—a property tax break, that is.
U.S. home-price growth has been deflating fast, with many more sellers cutting their asking prices and average listing prices across once-hot cities cooling in January, according to the latest monthly data from Realtor.com released this week. The median listing price has fallen nearly 5% since last year in migration hot spot Austin, Texas, and nearly 6% in Denver, for instance.
As home prices fall further, now may be the time to get your home’s value reassessed to lower your annual property tax bill.
Understanding Your Property Valuation
How your property is assessed will depend on the state or municipality you live in.
Some states, such as Florida, require that properties be reassessed each year. Most jurisdictions determine a property’s value based on the market, though some have adopted more complicated methods.
Nevada, for example, is the only state with a bifurcated valuation system, in which land and the buildings upon it are valued separately. The taxable value of the building is the estimated replacement cost , which is the estimated cost of reconstructing the same building today, minus the cost of depreciation. Due to this system, few homes in Nevada are valued at “market price,” said Mary Anne Weidner, assistant director of Assessment Services in Clark County.
Most states, though, calculate valuations primarily based on sales data for comparable properties. Because of this, larger custom homes may be harder to evaluate, as assessors have fewer comparable sales data to work with.
Assessments also factor in any improvements, such as additions or repairs, that were permitted by the county that year, said Amy Mercado, the property appraiser in Orange County, Florida.
Orange County also uses aerial photography to zoom in on properties and tell what was happening at the property and when.
“We can usually tell if somebody’s building a fence or an addition, a pool, a patio—or if they remove an addition or fill in a pool,” Ms. Mercado said. “We don’t miss much.”
Florida has certain limitations in place that guarantee that a property does not increase in assessed value by more than 3% annually—unless there’s a sale, at which point all caps are removed, and the home resets to current market value, Ms. Mercado said.
Meanwhile, in California, homes are not reassessed every year. Rather, they are only assessed after new construction or a change in ownership. This rule, passed by voters as Proposition 13 in 1978, is meant to ensure that property values don’t fluctuate wildly from year to year.
That means a homeowner who bought a property at $1 million in 2010 and held onto it through 2023 without making any additions, would still have the same assessed value, plus yearly inflation factors, not exceeding 2% per year.
As a result, neighbors in identical homes but who bought at two different times may find themselves paying vastly different amounts in property taxes.
Getting a Reassessment
In states where property values aren’t reassessed yearly, such as Texas, California and Tennessee, homeowners have a major incentive to get their property reassessed during downturns in the market if they bought when home values were high, as they were in the past two years.
Bill Pierson, assistant assessor in the valuation division of Marin County, California, says that his office is flooded with people looking for reassessments when the market dips. The period following the 2007 housing market crash was one of his office’s busiest times, he said.
For those who feel that their home’s value has changed, most assessor’s offices offer an informal appeal process, in which a homeowner can sit down with an analyst from an appraiser’s office to discuss the valuation of their home.
Homeowners should be prepared to come with evidence backing up their assertion, such as comparable sales data or recent property appraisals by a third party. If the owner asserts that their property has been damaged, an assessor may ask for a contractor’s estimate on the cost of repairs
If the informal process doesn’t produce the homeowner’s desired result, they can still file a formal appeal, which typically goes to the county Board of Equalization, where both the assessor’s office and the homeowner present evidence as to the value they believe is justified. In some states, as a last resort, a homeowner can appeal the decision of the County Board of Equalization to the State Board of Equalization, before it goes to court. Deadlines on when to file appeals vary by jurisdiction.
“Filing an appeal is one thing,” Mr. Wilson said. “Winning the appeal is something else.”
In filing an appeal, homeowners risk the chance that a closer look at their property results in an increase in home value, rather than a decrease, said Jeff Wilson, assistant vice president at Orange Coast Title in Santa Ana, California.
“There’s a way it could backfire,” Mr. Wilson said.
Even if a homeowner does get the assessor’s office to agree to a new valuation, that lowered value may not be locked in forever. In California, if the assessor’s office does decide to reduce the value, they put it in “decline status,” at which point the property is reviewed every year to determine whether the assessed value is still in line with the fair market value, said Mr. Pierson.
Homeowners should pay attention to deadlines, says Warren Wheeler, executive director of the New York State Assessors Association. Most assessor’s offices offer a limited window to file an appeal, although all localities differ. In New York, that time period is just two months, he said.
Other Ways to Lower Your Bill
Many states also offer homeowners exemptions on valuations for those who claim the property as their primary residence, though those amounts can vary widely.
In California, the exemption reduces the assessed value of someone’s primary residence by $7,000, resulting in typical savings of around $70 in taxes, according to the Sacramento County Assessor’s Office. Florida provides for a $50,000 homeowner’s exemption, Idaho allows for an exemption worth 50% the value of the property, up to $125,000, and Texas offers a $10,000 exemption for property taxes related to school districts. Usually, homeowners must file an application to receive the discount.
Owners can check with their local tax authorities to see what options are available for them.
Via Mansion Global