Real Estate Taxes
How To Reduce real estate Taxes By Challenging Assessments
Investing in real estate can be a fantastic way to save for the future and secure your retirement. It can also be a great profession to engage in to create current income as well. It can be a heckuva lot better than investing in the stock market and watching your money spiral down the drain because with real estate you always have a building that is tangible and can be sold, sometimes at a profit and sometimes not, but least there’s something there.
One thing that is infuriating about investing in real estate is property taxes. You can have all of your facts and figures correct that spell out a real estate investment will be profitable and then two years into it the local town raises your property taxes by 15 or 20% and blows all of your facts and figures out of the water and suddenly you’re faced with a potential loss.
I don’t think I need to explain to you that real estate property taxes are hardly ever grounded in reality. When the recession of 2008 to 2010 first started and was just a few months into it, property values dropped across the border in virtually every segment of the housing industry yet at the same time I had houses in towns where the local government was massively increasing property tax rates.
Property taxes are supposed to be contingent on the value of a house so it’s mathematically impossible to increase taxes when the values of the house are universally plummeting but nonetheless that’s exactly what happened. Like I said it is infuriating.
Luckily there are many things you can do to challenge the local government when they raise your rates. First you need to understand exactly how these taxes are calculated, and realize how they’re supposed to be calculated.
Basically an effective real estate tax is the tax rate multiplied by the assessed value of the home. Unfortunately there’s not much you can do about the actual tax rate. The government will set that rate at whatever they want to. What you can challenge is the assessed value of the property.
If you can show that the value of your home has gone down significantly then you can get them to re-assess the property tax that you owe.
There are really two ways the you can argue successfully to lower your property taxes. The first way is to show that your property is overvalued. If the town thinks your house is worth $400,000 and you know it’s only worth $300,000 then you can argue that.
The other way to argue is to show that the assessment that they have made on your house is higher than on comparable property in the same area. To argue this you must collect data, obviously, on the value of the other properties in your area.
Don’t be scared of the government especially not a small town government because they will always try and squeeze more money out of you then they should and you really should stand up for yourself and are completely within your rights to do so and hopefully now you have the information you need to do it and to do it correctly.
About the Author
Jason Markum has been an article writer online for well over 13 years. When he’s not writing articles, he has a good time running a hot tub enclosures web site where he also reviews the best used hot tub for you today.
How do real estate taxes work? Possibly buying a home?
I mean do you pay them, every month or every six months or once a year? How much are they? Is it a percentage of the cost of your home or something? eeeeek
Real estate taxes vary widely depending on your state and local government. There are areas of the country where taxes may be as little as $2000-3000/yr, and a nice house in a nice neighborhood in a high-price high-tax state can run over $50,000/yr.
They may be due quarterly, semi-annually or annually. You may have to pay both real estate taxes and school taxes. Your realtor should tell you what the tax scheme is for the area or community where you are looking for a house. They must also disclose current tax rates and the current tax bill, when the next payment is due, etc.
Many lenders will require the first year’s taxes to be paid in advance, as well as the first year’s homeowners’ insurance, with proof of payment presented at the closing. Some may then add 1/12 of annual insurance and annual property taxes to your mortgage payment so that these are paid in advance and held in escrow for them to pay when due.
Your property taxes will go up. Whatever it is now, it will be more next year. Towns, villages, cities, counties, school districts all over the US are hurting for money, inflation is hitting them hard, and taxes are skyrocketing in many places! Be sure you understand what taxes, easements, and special assessments apply to any property you consider BEFORE you make an offer on it. The realtor is required to disclose all of this info to you. Make sure you understand it all clearly.
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