What are Property Taxes?
Property taxes are one of the pains of homeownership. Oftentimes as a homeowner, you will look for every way to reduce your property taxes. If you ask most homeowners, they will likely tell you that the much they are paying for their property taxes is too much. The property taxes are subject to the county laws and regulations, meaning that they are calculated by the local governments. They are also considered as an “ad valorem” which means, how much you pay in these taxes will be dictated by your property’s value.
Unfortunately, as a homeowner, there is only a handful of options at your disposal in as much as property taxes are concerned and one of these is finding the strategies to reduce your property taxes.
A property tax is an annual cost that is paid for by the homeowners, businesses, and other legal entities who have properties. Property taxes in most cases are considered a regressive tax mainly because they are not dependent on your income. The revenue that is generated from the property taxes is used to fund the local projects and services, for instance, the fire department, law enforcement, local public recreation, and education.
While all these benefits are shared by everyone, property taxes can be burdensome to the homeowners. What you’ll realize with property taxes is that they will rise steadily over time. Even when you are done with your mortgage, depending on where you live, you will still be required to pay your property tax. Basically what that means is that, as long as you are a homeowner, you will never be free from property taxes, but there are simple tricks you can use today to reduce your property taxes.
Understand your Property Taxes
Even before we break down the strategies to reduce your property taxes, you need to understand how your tax is calculated. If you feel that you are already paying too much than you are supposed to, then it is important to check how your municipality calculates your tax.
It is not a surprise that many homeowners usually pay for these taxes without interrogating how they are calculated. It even gets worse because you may find that you are paying more than what your next-door neighbor is paying.
Your property tax is calculated using the tax rate and the current market value of your home. From time to time, the local tax authorities may reset the tax rates which ultimately affects your property taxes. The rate at which These resets happen is largely influenced by the state laws and some states will change these laws annually. Municipalities also determine the amount you will pay in property taxes, also known as the mill rate.
Why Is Your Property Tax Higher?
There are a few reasons why your property tax may be higher than your neighbor’s. However, it all boils down to your property value.
Property tax = tax rate*Home’s Current Value
For instance; in Ohio, the treasurer collects taxes based on the property value and current tax rates (millage).
Market Value x 35% = Assessed Value
(Assessed Value x Tax Rate)/1000 = Current Real Estate Tax/Year
The property tax value will be determined by the tax assessor. In some states and counties, the assessor is an elected official. This is the person largely responsible to assess each property’s market value. By looking at some metrics such as the home’s square footage, amenities, comparable properties, and more, they will use this information to assign a property tax to owners. The process is then repeated on an annual basis which is why property taxes will change annually.
In a nutshell, if your property is worth more than your neighbors, then you could end up paying more in property taxes than your neighbors.
Strategies To Reduce Your Property Taxes
If you are sure that you have been paying high property taxes, or if you note that your property taxes have gone up recently, there are some strategies you can use today to cushion yourself against these taxes.
Get Your Property Tax Card
As a homeowner, you can request a copy of your property tax card from the local assessor’s office. This card contains important information the tax assessor has gathered about your property, information that is used to calculate your tax.
The tax card contains information about the land size, the precise size of each room, the number, and the types of fixtures that are located within the home. As you review your property card, look for any discrepancies and if you note any, raise them with the tax assessor. They will either make a re-evaluation of the property or make the correction.
Compare Your Valuations With Others
The same way you have requested for your valuations, you can request other property assessments in your area. In most areas, this information will be freely available at the town hall. Get curious and know what your neighbors are paying for their property. Similar properties should be taxed the same, and by just looking at your neighbor’s card, you may note some discrepancies regarding the actual value of your home.
Do Not Build Now
I know, it sounds bad, but if you really want to reduce your property taxes, hold off the thought of building now. Any major structural changes to your home will add to the tax bill. A deck, a pool, or even a large shed that’s added to your home is presumed to increase your home’s value.
If you are going to add any permanent fixture in your home, it is important that you first investigate how much of an increase that new addition will be to your home before you begin the construction. If you call your local building and tax departments, they will give you a ballpark estimation of what that’s going to be.
Check Whether You Qualify for Discounts or Tax Reliefs
Just like many other types of tax policies, there are certain exemptions that are available to the people who qualify. When it comes to property taxes, many states do have some discounts for special groups of people. For example the senior, the veterans, or the people with disabilities. It is important that you look up your local tax laws to figure out if you qualify for these exemptions. If not, check whether there are other discounts available. For instance, one might qualify for a lower tax bill if their property is used for agricultural purposes or if it is their primary residence.
Property taxes are among the many costs of homeownership and the bad thing is that they are recurring. Even if you clear your mortgage payments, you will still be required to pay your annual property taxes. That being clear, you should never be afraid to gather more information about your property taxes. Find out what your area’s tax policy is and follow up your property assessment. Learning the various strategies you can adopt to reduce your property taxes is a great way to get ahead and make sure that you are not overpaying each year.