What Homeowners Need to Know About Property Taxes

Bag with the money and the word Taxes and wooden houses. Owning a house means you need to pay property tax. (Andrii Yalanskyi/Shutterstock)

When you purchase your first home, you become aware that you are required to pay for the privilege of owning a home. That payment comes in the form of property taxes.

Property taxes are a revenue source for most local governments. Whether you live in a city, a town, a village, or a parish, you are likely charged a property tax. Property tax revenues usually fund for local services such as police and fire departments, schools, infrastructure repair, recreational facilities, and other local governmental costs.

To consider your property tax situation, let’s look at the basic tenets of property tax charges.

How Your Property Tax Is Calculated

The amount of property tax you pay is a percentage of the assessed value of your home. It is not based on the purchase price or the appraised value of your home. At some point, the value of the building you call home was assessed by the local government, and that assessment is attached to the home until a reassessment occurs.

The percentage of the assessed home value you are charged is determined by your city or county. It can vary widely throughout a state. However, most states set a limit on the assessed value as it relates percentage-wise to the appraised value of the building.

Although assessment percentages vary by city, county, and state, it is relatively easy to find out your local percentage rate, with a web search for “what is my property tax percentage” or “my local property tax calculator”.

In some areas, you may also be assessed a property tax for the ownership of boats and cars.

How Is Your Home Assessed

The assessment of your home takes into account its age, its location within the community, the amount of land your home sits on, and any outbuildings (shed, garage) that exist on the site. The local assessment authority also considers any changes in local property values and alters the property tax assessment accordingly.

Because property values can change from one year to the next, the assessed value of your home will change over time. Jurisdictions determine how often they will reassess property values (every year, every five years) and will change your property tax amount accordingly.

How to Reduce Your Property Tax Bill

Property tax exemptions: In some cases, homeowners can qualify for a property tax exemption. Some of the most common property tax exemptions are available for seniors, veterans, and homesteaders. These property tax exemptions will reduce, but don’t usually eliminate, property taxes.

Changes to your home: Any changes you make to the structure of your home— removing a patio or deck, for example — could cause your next assessment to produce a lower tax bill.

Owners of properties in the U.S. need to pay property taxes. (Fotolia)

Property tax appeals: You do not pay the same property tax amount as your neighbor, because your home was most likely assessed at a different value than your neighbor’s, based on lot size or house size. If you feel your property tax bill is too high, you have a legal right to file an appeal asking that your home be re-assessed.

Be aware, however, that a reassessment could determine that your property value has increased, also increasing your property tax.

Talk to Your Neighbors

If you are friendly with your neighbors, ask them what they pay in property taxes. You’re likely to find out that one of you is paying more in property taxes than the other. Each home was assessed individually, and depending on the number of times an appeal was filed, the assessed amount can differ widely.

Your property tax bill is not set in stone. It is the product of numerous decisions by local lawmakers and property assessors. You can, if you wish, spend the time and money to get your home reassessed so your property tax bill more accurately reflects the value of your home.

Appealing Your Property Tax Bill

Appealing your property tax bill is a process you can do yourself. Start by contacting your local assessor’s office. It’s important to ask how your assessment was prepared, and then do your own research. Look at comparable property sales or other factors that you believe reflect the true value of your property.

Hire a property tax consultant: However, appealing your property tax bill can be a time-consuming process. Many people hire a property tax consultant, who will search property values in their neighborhood and file the necessary paperwork.

Homes in Malibu, Calif., on Sept. 24, 2021. (John Fredricks/The Epoch Times)

Property tax consultants usually charge a flat fee (for example, $200) plus a percentage of any savings you realize when your home reassessment results in a lower property tax bill. They can also advise you as to whether an appeal will be likely to lower your property tax bill.

Although requesting a reassessment takes time, for some homeowners it is worthwhile to appeal repeatedly. Rather than simply accept the local government’s assessment, these homeowners will request a reassessment frequently, especially if the home property value has dropped for some reason.

Paying Your Bill

Your property tax bill is likely in the thousands of dollars, and would come as a shock if you pay it out of pocket twice a year.

However, most mortgages roll property taxes into your monthly mortgage payment, putting the funds into an escrow account to pay the property tax bill when it comes around. In fact, many mortgages require that the escrow amount cover the property tax so that there is no threat of a lien placed on the home due to underpayment of taxes.

How Your Property Tax Impacts Your Tax Return

If you itemize deductions on your income tax return, state and local tax (SALT) deductions can be taken. State and local taxes have traditionally been deductible in full from federal income tax. However, federal tax changes enacted in 2017 capped these deductions at $10,000, potentially affecting homeowners in high-tax states.

Every state operates differently in terms of the amount of tax payments that can be deducted on state income tax returns. Some states also offer a tax credit to property owners. Discuss your property tax situation with a tax professional if you need to consider reducing the tax bite of your property ownership.

A neighborhood in Huntington Beach, Calif., on May. 5, 2021. (John Fredricks/The Epoch Times)

Do Renters Pay Property Taxes?

The answer is no, and yes.

If you’re a renter, you do not receive a property tax bill, and you cannot deduct property tax on your income tax return because you will not be charged individually.

However, although you don’t pay property tax directly, the property tax of your rental is most likely considered when your monthly rent is set. So, your monthly rent is helping to pay your landlord’s property tax bill.

The Epoch Times Copyright © 2022 The views and opinions expressed are only those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.