Fewer than 5 percent of taxpayers protest their property tax assessments. But the majority of those who do achieve a full or partial victory.
A key aspect of joining this elite group is to gain an understanding of the process for appealing an assessment. Taxpayers should know filing deadlines, the criteria, and the documentation necessary to file. Other factors to consider before filing may be the length of time between assessments and whether the tax savings are worth the time it takes and the cost of hiring an attorney. There’s also the slight chance that a challenge may result in an assessment being raised, resulting in an increase of property taxes. Generally, Department of Revenue websites provide instructions on how taxpayers can dispute property tax assessments or at the very least, include appeal information on tax bills.
Property tax is determined by multiplying the county or the city’s tax rate by the assessed value of the property, including structures. Assessors may determine the value of property by looking at the median prices paid in the area, the property’s income producing potential, or estimating how much it would cost to replace a property with one similar. During municipality revaluation periods, assessors may even physically inspect properties and adjust them to their fair market value. Although assessors aim to provide equitable and uniform values, the accuracy of assessments are limited by the availability and reliability of information and the subjectivity of each assessor.
According to the National Taxpayers Union, “experts estimate that between 30 and 60 percent of taxable property in the United States is over-assessed…[y]et typically fewer than 5 percent of taxpayers challenge their assessments, even though the majority who do so win at least a partial victory when properly prepared.” Still, a lower assessment does not necessarily mean tax savings. It is important for taxpayers to understand the relationship between the tax rates and property assessments. As a 2007 article in Bloomberg Business discussing how to reduce property taxes noted, “[a] municipality intent on raising revenue can always hike the tax rate for all taxpayers, which would reduce or offset any savings you're able to realize through an appeal.”
Property owners who are ready for an appeal should be sure to check with the local assessor’s office or website for filing deadlines and forms. It is also a good idea to be prepared with documentation on comparable properties, tax records, and photos to prove that an assessment is unfair. If you suspect that your assessment exceeds its fair market value, don’t take an inaccurate assessment lying down, fight back and file an appeal—the odds just might be in your favor.
Continue the discussion on LinkedIn: When should a taxpayer hire an attorney to file an appeal?
For more information about state tax issues, sign up for a free trial on Bloomberg BNA’s Premier State Tax Library.
By Cynthia N. Wells
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