Should You Challenge Your Tax Assessment?

Your County Appraisers Office has data online that shows the tax valuation for all properties in your County (or other jurisdiction).   Check the assessment of comparable homes before challenging your assessment.

I got a piece of junk mail the other day from a company offering to challenge my property tax assessment.   They told me horror stories about how high my taxes were going to go, if I didn't challenge the assessment right away.  And they helpfully offered to do this for me, using a sliding scale of fees.

This tipped me off right away that the company was probably a fraud.   Whenever a company's fees become incredibly elastic, there is probably a scam afoot.   Invention brokers work the same way, offering to Patent and "market your invention" for $15,000 and 5% of royalties, or 10,000 and 10% of royalties, or $5,000 and 20% of royalties.

Of course, the royalties never materialize, and they keep the money.   Yet you would be surprised how many inventors opt for the $15,000 ripoff as opposed to the $5,000 ripoff.

This reassessment company had the same gag - $200 and 25% of the savings in taxes, $100 and 50% of the savings in taxes, or $50 and 75% of the savings in taxes.   If you think about it, if they were legitimate, you would go with the last option, as it would give them the incentive to go for the highest decrease possible.   But I strongly suspect that if you send these people $50, $100, or even $200, you would get nothing.

And the next week, my assessment came in the mail, and since the market is down, my assessment dropped and my taxes dropped by $250 anyway - without their "help."

But it raises the question - should you challenge your tax assessment on your house?

Well, you can, and you can do this yourself, without hiring some company.   But don't get all excited - chances are, you are not going to get a lot lopped off your tax bill, if anything.  You may actually get your tax bill increased if the assessor looks too closely at your "improvements" - somethings it is better to say nothing, if your assessment seems reasonable.

To begin with, call your County or other tax authority (City, Village, Town) and find out when it is possible to challenge the assessment.   In many Counties, they have a period where you can bring challenges.  Once that period expires, you may still be able to challenge the assessment, but only after the tax is paid, and in court, which may be a lot more expensive.   So be sure to find out when these windows occur, and mark them on your calendar.

Next, check the assessments of comparable properties in your area.   If you live in a subdivision, chances are, finding a comparable is no big deal.   And what your neighbors pay in taxes is a matter of public record.

When I was in my 30's, in my second home, I was outraged to get an increased assessment.   I called the County to find out the procedure to challenge the assessment.   The helpful County employee told me that I should check assessments of neighboring properties before I flew off the handle.

"How do I do that?" I asked.

"Give me an address, and I'll tell you their assessment and tax bill, and even whether they paid it on time!"

I was flabbergasted, assuming this was some sort of "private" information - but of course it is not.  How much you paid for your house, how much you borrowed on your mortgage, and whether you are delinquent on your property taxes, are all matters of public record.   Again, self-proclaimed "Privacy Advocates" have their head up their arse.  Much of your life is public record - get over it.

I quickly gave her the addresses of some similar homes on our street.  And she was right - most of them were assessed at the same rate as my house, if not higher.   In fact, the abandoned house across the street had the highest assessment of any house in the neighborhood.   So I took her advice and kept my mouth shut.  I had one of the lowest tax bills on our street.

Today, this data is available online, usually, and you can log into your County's website, and print out a plat of any property (the tax map) and also look up the assessed value, the owner of record, etc.   The picture above is an example from the  Lee County, Florida, Assessor's Office, and is an example of a pretty well run site (click to enlarge).

How well this works, varies from jurisdiction to jurisdiction.   In our County, for example, I can look up the tax information, the ownership information, and the date sold.   But the mortgage information and tax stamps (which would tell me the purchase price) require access to another database, or appearing at the County Courthouse in person.  Similarly, in the example above, the links to copies of deeds are disconnected - you have to go to the Courthouse to get copies of those.

If everyone else's house seems to be assessed at the same rate as yours, chances are, you are not going to get very far with a challenge.   But in cases where you think your house is over-assessed (such as the man with the abandoned house across the street from me, who never challenged his assessment!) you could get a reduction.

In some areas, houses are not very similar, and assessing homes is a nightmare.   In the rural area of Central New York where we lived, the assessor was not a popular person - and they had a thankless job.   No two houses were alike, in terms of construction, location, view, lakefront, or whatever.   Trying to come up with numbers for the tax base was difficult, to say the least. 

And, as in most jurisdictions, out-of-towners and absentee landlords usually get it stuck to them, big time.  And yes, in rural counties, there may be corruption and a little back-slapping.   The locals elect the assessor, and he/she makes sure the locals have low assessments and the out-of-towners and summer people are socked with high assessments.   Act shocked.

Should you hire a lawyer to challenge the assessment?  Or some sort of company, like the one that advertised to me in the mail?   I am not sure.   If you can clearly show your house is assessed at a rate higher than comparable homes, then it should be an easy case to make before the County (or village, or town or city) assessment board.   But some folks do hire attorneys to represent them, particularly when dealing with larger properties.

Property taxes are a recurring expense, and thus if your assessment goes up, this means your taxes will likely go up as well - for every year going forward, until you decide to sell and move.  So even a "small" increase in taxes is worth challenging, as it can add up to thousands of dollars, over time.

On the other hand, in some jurisdictions, taxes are just insane.  In New York and New Jersey, for example, people pay thousands, even tens of thousands of dollars a year in property taxes.    There is really no way to cut these bills dramatically, other than to move to a lower-tax State (as I did).  You can challenge the assessment, but the millage rate (the tax rate on the assessed value) is not something you challenge, other than at the ballot box.

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NOTE:  It goes without saying that assessed values are not indicative of market values, at least for most markets.   Some jurisdictions have attempted to use "full market value" in their assessment calculations.   Others attempt to do so, but then end up falling behind, as market values outstrip the assessor's ability to recalculate everyone's property values.   Other jurisdictions assign an nominal "assessed value" which may be a percentage of market value, or just may be a made-up number that is only relevant in terms of how it compares to other properties in your area.

I have seen people online say dumb things like, "I paid $250,000 for my condo, and I just got my tax assessment, and it says the property is only worth $50,000!  Where did all the money go?"   And that statement is wrong on a number of levels....