New Jersey has some of the highest property taxes in the nation and they seem to climb just about every year, as local municipalities rely on them to fund schools and local infrastructure projects. According to NJBiz, the average resident’s property tax bill increased to $8,354 in 2015, up $193 from the 2014 average of $8,161.
So how do you find out if you're paying too much for your own property taxes? Let's use the Garden State as an example of how to wade through the maze that makes up your property taxes. (For related reading, see: Property Taxes: 4 Little-Known Ways to Reduce Them.)
Jersey as a High-Taxed Example
Below are each New Jersey county’s top two towns by average property taxes:
Property taxes are based on a percentage of the assessed value of real estate, generally with a complicated formula that incorporates both land and building. These tax rates are set by the local municipality each year, usually at the beginning of the calendar year. However, it is possible for you to file a petition to your municipality for a reassessment. You cannot petition to lower the tax rate, but you can petition to re-assess the value of your real estate to reduce the overall tax.
With the decline in real estate values of the recent past, it is possible that your home might have a tax-assessed value that is greater than the current market value. The housing market is usually inefficient in this way, and house pricing is impacted by quite a few intangible factors. In many areas, the annual assessment is based on an automatic increase in value rather than an actual revaluation process.
The petition forms can often be found on your municipality’s website and are not difficult to complete. However, there is usually a filing fee. The form will ask for information about your property that is printed on your Notice of Property Assessment card which you should receive in the mail each year. In addition, you will also need to provide the reason for the appeal and comparable property sales for the basis of the reassessment. (For related reading, see: Top 4 Things That Determine a Home's Value.)
Value and Comparable Sales
The best way to value your home is by comparing it to recently sold properties just like yours. You may be able to get your local real estate agent to assist you. There are also numerous online tools and software that can help identify comparable property prices which you can use in your petition to adjust the assessed property value. The software is generally inexpensive. One of the planners at our firm used an online website for a fee of $79 and received a 25% reduction in tax after appealing twice in three years just by submitting the comparable assessments and required forms and then negotiating it with the tax assessor over the telephone.
A word of caution: While free websites like Zillow and Trulia can give you a quick estimate of the value of your property, they are not official and will not be acceptable for the appeal, as specific comparable sales are needed.
What if Your Appeal Is Rejected?
If your reassessment was rejected, a professional assessor may help; however, an assessor costs approximately $300 to $600. Keep in mind that you are trying to lower the value of your home. If you are looking to sell in the next few years, you may want to consider this and allow future owners to sort out what the assessed value should be. Mortgage refinances may also be impacted by a lowered property assessment. Experienced real estate attorneys may be able to help you navigate this and maximize your potential tax reduction. However, engaging an attorney may only be worth it if there are serious assessment errors to justify the cost of an attorney. (For related reading, see: The Importance of Personal Finance Knowledge.)
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