How Do I Save Money on County Property Taxes?

Within the last year we finally got around to doing something that was on our checklist, moving out of our starter home and into our dream home. I never realized just how happier we could be with more room to grow. I used to cringe at the idea of having people over when space was limited. Now, I can invite friends and family over and hide in many corners of the house without ever seeing them. I am kidding mom!

We happen to be very fortunate with the purchase of our house, as we scored a major deal for the area, and even found out about a few skeletons in the closet. I remember when we were in the process of purchasing the home, and the appraisal came back when we were on vacation, and I was extremely bothered by how low the number came in. Meaning the homes in the area continue to maintain a pretty reasonable value despite the housing hardships. However, appraisers have to use pretty reasonable numbers in today’s market to make banks feel comfortable to underwrite them into loans. We were still purchasing the home for a considerable amount below the appraisal, and certainly lower than other homes in the neighborhood. I just expected the appraisal to come in at millions of dollars, I mean closer to at least what the previous owner paid, considering all the improvements. In my experience, taxable values on property are lower than their actual market value, so the appraisal should have come back more than what the County was taxing the property.

Let me use some generic numbers to try and explain.

Previous Sale- $267,000
Taxable Value- $247,000
Appraisal- $220,000
Purchase- $200,000

So looking at the first two numbers, it made sense to me that the taxable value was under what the house had previously been sold for, as has been my experience with our starter (now rental) home. So I whole-heartedly expected the appraisal to come in around $250,000+, to help really justify to myself that we were getting a great value.

However, after I let my emotions get the best of me, I started to realize maybe our “low” appraisal was a blessing. Since both our purchase price and appraisal were considerably lower than the current taxable value, I knew we could try and have our taxes adjusted to a lower value. I am going to try and talk in generalities, but please keep in mind each particular municipality will have their own rules that may vary to lower your taxes.

1) Research with your County office how they assess property taxes, and what you may do to appeal value. In our County, appeals to tax assessments can be submitted from January to March of each year. The owner is responsible for demonstrating why an assessment should be adjusted.

2) Read through and familiarize yourself with the appeal process, and exactly what needs to be submitted, and when. Counties are being inundated with more and more applications each year due to declining property values. Our County considers recent sales of a property proof of value, but there are other methods your County may consider for re-assessing your taxes. Be warned though that it often is not a good enough excuse to say my neighbors are only paying ____ in taxes and I want mine lowered. You typically will need to show up with an appraisal or some other document to prove value.

There are two important numbers in my example above.

Taxable Value- $247,000
Purchase- $200,000

Note, the almost $50,000 difference in taxable value. This is where I knew we could score our family some considerable savings in property taxes. After thoroughly reviewing the appeal process of our County, I submitted an application, as well as a copy of our purchase agreement. Therefore, I should be able to simply drop the assessment value on our house and save considerable money.

3) Be prepared to attend a hearing with the County tax board. Typically, the County will then contact you with your scheduled hearing date. One will need to present their proof of value to the board, at which time they will review the evidence and determine whether a tax adjustment is necessary.

This is where we got extremely lucky for several reasons. First, the County allowed our purchase price to determine value, which means my job was pretty much complete. As a back-up, I had my appraisal report, but regardless, we were getting our taxable value lowered. Second, if one is proposing to lower their taxes by $50,000 or more, the School Board needs to be invited to weigh in on the assessment. It is another hurdle one does not want to have to necessarily deal with as it complicates the approval process. We just got in under the $50,000 cut-off, and avoided School Board involvement.

So what happened?

We received a letter in the mail with a determination of value, stating they reviewed the documentation, and will lower our taxable value from $247,000 to $208,000. It is now up to us whether we want to attend a hearing to contest their value yet again, or sign-off and agree with the assessment.

At first I questioned to myself why they chose $208,000 versus the $200,000 we purchase the home for several months earlier. However, in the end, we signed the assessment and sent it back in to lower our property taxes. Overall, it was a simple process, and we avoided having to take time off of work and attend a hearing.

What does it mean, and why did we accept a value higher than our purchase price?

Should we have kept pushing to lower the value on our tax records closer to our purchase price? Well not really.

I do not know exactly how the County assesses market value, or why they gave us an $8,000 tax market value higher than our purchase price. I think being within $8,000 is pretty fair, and here is why. In our County, assessed value for taxes is 35% of the County market value, then taxes are calculated off of that value. Therefore, here are the numbers for comparison.

Current
Value $247,000
Assessment (35%) $86,500
Taxes $4,800

Re-Assessed
Value $208,000
Assessment (35%) $72,800
Taxes $4,100

Based on Purchase Price
Value $200,000
Assessment (35%) $86,500
Taxes $3,900

The bottom line is when you factor in all the numbers, if we were to try and argue to get the tax market value down to our $200,000 purchase price versus the $208,000 they want to give us, we would only be saving less than $175 per year in taxes. It simply is not worth it to go and argue the case for $175.

So despite some disappointment initially from a low appraisal, I saw the good in the bad as it helped lower our taxes; well kind of considering I never had to pull out the appraisal to the tax board. Our family saved about $700 annually on our property taxes by simply filing some paperwork with the County.

Have you had success getting your taxes lowered? If not, maybe you should consider the current value of your property and consider having your jurisdiction reevaluate your taxes. It could save a family some considerable money.