Property taxes can be extremely burdensome for a homeowner. They tend to rise steadily over time and, even once you pay off your mortgage, the taxes keep on coming. The good news, however, is that there are some things homeowners can do to minimize the property tax burden.
Keep reading to learn some simple tips any homeowner can follow to lessen the pain when tax time rolls around. (For related reading on tax issues and mortgages, see The Mortgage Interest Tax Deduction and A Tax Primer For Homeowners.)
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1. Request Your Property Tax Card … And Study It
Few homeowners realize they can go down to the town hall and request to view (or receive a copy of) their property tax cards from the local assessor's office. The tax card provides the homeowner with information the town has gathered about the property over time.
The card includes information about the size of the lot, the precise dimensions of the rooms, and the number and type of fixtures located within the home. Other information may include a section on special features, or notations about any improvements that have been made.
As you review this card, note any discrepancies and then raise these issues with the tax assessor. The assessor will either make the correction and/or conduct a re-evaluation. This tip sounds laughably simple, but mistakes are common. If you can find them, the township has an obligation to correct them.
2. Don't Build
Any structural changes to a home or property will increase your tax bill. A deck, a pool, a large shed, or any other permanent fixture that is added to your home will increase your tax burden.
With this in mind, homeowners should investigate how much a new addition might cost in terms of property tax prior to construction. Call the local building and tax departments. They'll be able to give you a ballpark estimate.
3. Limit Curb Appeal
Tax assessors are given a strict set of guidelines to go by when it comes to the actual evaluation process. However, the assessment still contains a certain amount of subjectivity. This means more attractive homes often receive a higher assessed value than comparable houses that are less physically appealing.
Keep in mind, your property is essentially being compared to your neighbors' during the evaluation process, as well as others in the general vicinity. While it may be difficult, resist the urge to primp your property prior to the assessor's arrival (which is usually a scheduled affair). Finally, if possible, don't make any physical improvements or cosmetic alternations to the home (new counter tops, stainless steel appliances, etc.) until after the assessor has conducted the evaluation. (When selling your home, a little primping goes a long way. Learn more in Fix It And Flip It: The Value Of Remodeling.)
4. Research Thy Neighbors
As mentioned above, information about your home is available at the local town hall. What many individuals don't realize is that in many cases, information about other home assessments in the area is also available to the public.
It is important to review comparable homes in the area and general statistics about the town's evaluation results. You can often find discrepancies that could lower your taxes. For example, let's say that you have a four-bedroom home with a one-car garage, and your home was assessed at $250,000. Your neighbor also owns a four-bedroom home, but this house sports a two-car garage, a 150-square-foot shed and a beautiful swimming pool. Despite this, your neighbor's home was valued at $235,000.
Was there a mistake? There probably is an error - unless your property has some other distinguishing characteristics that explain the discrepancy. With all of this in mind, if an error is found, it pays to bring it to the assessor's attention as soon as possible so that you can get a reassessment if necessary.
5. Walk the Home with the Assessor
Many individuals allow the tax assessor to wander about their homes unguided during the evaluation process. This can be a mistake. Some assessors will only see the good points in the home - the new fireplace or the beautiful new faucets that adorn each sink. They'll overlook the fact that other appliances in the home are out of date, and that the roof is warped and needs replacing.
To prevent this from happening, be sure to walk the home with the assessor and point out the good points as well as the deficiencies. This will ensure that you receive the fairest possible valuation for your home.
Bonus Tip - Don't Shut Out the Assessor
You do not have to allow the tax assessor into your home. However, what typically happens if you do not permit access to the interior is that the assessor assumes you've made certain improvements (such as added fixtures or made exorbitant refurbishments). This could result in a bigger tax bill.
Many towns have a policy to the effect that if the homeowner does not grant full access to the property, the assessor will automatically assign the highest assessed value possible for that type of property - fair or not. At this point, it's up to the individual to dispute the evaluation with the town, which, incidentally, will be nearly impossible unless access to the interior is ultimately granted. The lesson: allow the assessor to access the home. If you've obtained permits for all improvements you've made to the property, you should be fine.
It can be hard to balance the desire for a beautiful home with the with the desire to pay as little tax as possible. However, there are some little things that can be done to reduce property tax without resorting to living in a dump. Remember avoid making any improvements right before your house is due to be assessed. Check out the neighbors, if they pay less tax than you but own similar homes, you could be in line for a tax reduction.
Don't assume that your tax bill is set in stone. A little homework and due diligence can help reduce the burden.
If you're still thirsty for tax hints, check out Tax Tips For The Individual Investor.
TaxesAn ad valorem tax is a levy placed on real or personal property based on the assessed value of that property.
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