For homeowners, the actual cost of owning a home is more than just a monthly mortgage payment. Even if your home is paid off, you still aren’t in the clear financially. Property taxes are a part of the package, and sometimes, this ongoing expense can become a homeowner’s biggest nightmare. But, if you are savvy about managing your property taxes, you have a good chance of reducing the cost significantly.
Below is an eight-point checklist for managing property taxes, including steps you can take to maximize your tax savings.
1) Property taxes can place a financial burden on fixed-income homeowners, particularly the elderly and disabled. Many states or jurisdictions have provisions that can reduce property tax burdens (if you meet the eligibility requirements), which allows homeowners to be more in control of their spending, and feel more secure. Homestead exemptions can help reduce the fraction of the assessed property value subject to tax. Circuit breaker credits can limit the share of income claimed by property taxes. Property tax deferrals allow homeowners to defer payment until the sale of the property. Keep in mind that the interest incurred on the unpaid property taxes during a deferral will increase significantly if the homeowner dies before the property taxes are paid in full.
2) Look at your property taxes with a critical eye. You can get a “property record card” (also known as a “field card”) from your assessor’s office to check for any errors in your home’s assessment. The wrong number of bedrooms or bathrooms, the wrong square footage, or even a building listed on your property that isn’t there can greatly increase what you owe. The error rate on the property card can potentially be very high, so it’s worth investigating. If you do find errors, you can potentially have those fixed on the spot, or you can file for an abatement (reduction in property taxes/assessed value).
3) To further dispute your property taxes, you have to gather evidence to support your claim that the town’s assessment of your property is too high. Show that your home isn’t as big, or the value isn’t in line with comparable properties. You can pay an appraiser to do this or, you can go to your local town hall to review public records of comparable properties.
4) If you itemize deductions on your income taxes, you can claim a deduction for property taxes that you have paid on your primary residence, or any residence you own.
5) If the value of your home decreases, that doesn’t necessarily translate into lower property taxes. Why? The money generated from property taxes goes to support your local community and government services. The percentage of money that your town services can request in a given year may increase, making your property taxes higher than they were in previous years. How can you recoup your losses? You can dispute your property’s assessment, or have your property re-assessed. Keep in mind that an assessor will need to have access to both the inside and outside of your home to make an accurate re-assessment of your property.
6) Tax laws can change, which can affect your local property taxes, so keep yourself abreast of any changes that the town has put forth each year for property taxes.
7) Think before you renovate. Many home renovations require a permit in most towns, which becomes public record, as well as a cause for a rise in your property taxes. Assessors can increase the market value of your home based on renovations.
8) Most home assessments are done every 2-5 years (depending on location). Many of them are “drive-by” assessments and assessors often refer to historical information to determine the assessment. All the more reason to have your home re-assessed sooner rather than later if you think you are being over-taxed.