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Assessing your property taxes: When should you consider a tax appeal

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Published: Jul 14, 2012    Updated: Jul 14, 2012    Views 3262    Comments 0
Help the community and translate this article to: Polski

Why not check if your house is assessed in line with comparable properties in your neighborhood. This process could lower your property taxes if your assessment is too high.

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I don't think I have to explain how housing prices dropped in last several years and and one would think so should the property taxes. Not that easy. Your municipality won’t do it for you just like that, they would loose a lot of their budget. If you feel your taxes should be lower, you have to do some work and file an appeal.

The most important part of the property tax appeal is supporting evidence, so you have to do some homework. The more evidence you have, the better chance that you get your tax lowered. Second, the timing is crucial as most of the municipalities have a deadline to file the appeal, therefore plan ahead. The deadline is usually around April 1, but you need to find out from your local Tax Assessor office and start the process early.

Additionally do some research to find out when was the last city wide revaluation of property tax assessments. Reevaluation essentially assigns an estimated market value to each property. This information is very important as it may provide you with more evidence. If this took place during the time when housing market was high, and now it’s low, then obviously your property is assessed too high.

When you should consider an appeal:

  1. The difference between assessed value of your property and your estimated value is significant. Some say 20% or more, but I don't see any reason not to try when difference is lower. You need to calculate these values using a ratio for your municipality. See an example below.

  2. The assessed value is different based on similar properties in your neighborhood with same square footage.

  3. The assessment is based on incorrect information about your property.


What you need to support your appeal:

  • At least 3 comparable property sales in your area that most closely match your properly, including lot size, living space square footage, number of rooms and bathrooms, number of floors, garage size, etc. The property sales should be in the tax year prior to appeal, i.e. for 2012 appeal, sales should be in year span before October 1, 2011. This may vary in your municipality. Again check with your tax office.

    This information may be hardest to get as it’s only available to real estate agents in a form that is easy to search. If you have a friend in a business, great, you may get this for free. Otherwise you may have to pay few bucks someone to print this out for you. But it’s well worth it as this is the part that the Tax Board looks at most closely.

  • Tax Rate and Assessed to True Value Ratio. This information is public record and if it’s not available online, your local Tax Assessor office or county Board of Taxation office should provide this. These values are needed to calculate property tax and convert between assessed and market value of your property. Note that you can’t compare the tax assessed value to market value - there is some calculation you need to make to figure out true market value that assessment is based on.

    Below is a example how to calculate all the necessary values to support your appeal. This calculation will help you figure your situation and it’s valuable evidence for the appeal application that shows how you arrived at the number that you request.

    Example:
    Assessed value 2011 $400,000.00
    Assessment to True Value Ratio 2011 109.53%
    True Value based on assessment $365,196.75
    Property Tax Rate 2011 1.947
    Current Property Tax $7,788.00

    True Value based on comparable sales $240,000.00
    Assessment to True Value Ratio 2011 109.53%
    Requested Assessment value $262,872.00
    Property Tax Rate 2011 1.947
    New Property Tax $4,672.80

    (Assessment to True Value Ratio and Tax Rate are actual values for Atlantic City, NJ municipality. Assessed value are fictitious for illustration purpose)

    Formulas:
    True Value based on assessment = Assessed value / Assessment to True Value Ratio
    Property Tax = Assessed Value * Tax Rate
    Requested Assessment = True Value based on comparable sales * Assessment to True Value Ratio


  • Appraisal of your property prepared by a licensed appraiser. If your property was recently purchased or refinanced, you can use these documents as evidence of current market value.

  • If you base your appeal on the fact that assessment is based on incorrect information about your property, then you need some proof.

Bottom line is you cant have too much supporting documentation. The more the better, as this makes a stronger case for your appeal.
Resources
1. A Guide to Tax Appeal Hearings
2. Atlantic County, NJ - Municipality Tax Rates and Ratios
3. New Jersey Form A-1 Petition of Appeal Form and Instructions
4. Zillow.com - Real Estate, Homes for Sale, Recent Sales, Apartment Rentals
About the Author
Henry Limowski is a freelance writer who shares his knowledge about personal finance and business catering to Polish community living in the U.S. He is dedicated to spreading financial awareness to help people save money. He's the president of QUELL Technologies, LLC, a parent company that owns PodatekDochodowy.com and AmigoLife.com among others.
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