Understanding Real Estate Property Taxes

by on April 12, 2012The Realestate.com Team

real estate property taxesIf you’re the average homeowner, your brain might shut down when the word “tax” is mentioned. Many people would rather have a root canal than talk taxes. So, let’s try to keep this lighthearted and hit just the basics.

Real estate property taxes vary by the local government that imposes them and are based on the assessed value of your property. According to Tax-Rates.org, folks in New Jersey pay the highest property taxes – 1.89 percent – while Louisianans pay the least — .18 percent. Your property taxes, along with those of your neighbors, are used to fund schools, libraries, and other county and city services.

Property Tax Assessments

Property taxes are usually based on two factors:

  • the value of the land you own
  • the value of any structures that sit on the land

These two values are then fed into a predetermined formula and out pops your property tax bill. Most municipalities reassess a property’s value every few years. This means that the amount of property tax you owe may change over time.

In some areas, certain groups of people, such as seniors or disabled veterans, may be exempt from paying all or part of their property taxes.

Deducting Property Taxes on Your Other Taxes

Tax laws change more often than the politicians who push for them, so it’s best to speak with your accountant about where the deduction of your property taxes falls within the current tax code.

How Can I Reduce My Property Tax? Appealing Property Tax Assessments

Although your property taxes are based on the market value of your home, the value utilized by the assessor may not be current. In a hot market, when values are rapidly rising, this may be a good thing, as your value is rising and your taxes are low. In a down market, when values tumble rapidly, you may be paying more than you should. Generally, your property tax assessment should reflect the price at which you could sell your home.

While the statistics vary according to region, it is estimated that between 30 and 60 percent of homeowners in this country are over-taxed, according to the National Taxpayer’s Union. Furthermore, homeowners who disagree with the assessor’s valuation of the house have a right to appeal property tax assessments. Despite this, fewer than 5 percent actually appeal, even though most of those who do eventually win.

If you decide to appeal your property tax assessment, contact the assessor to find out about the process. There may be time limits or other restrictions that you need to be aware of. You will also need to be fully prepared when you present the appeal. Ryan Shaughnessy, Missouri real estate expert, recommends some of the items you will need to include with the assessment appeal:

  • a comparative market analysis of your home, prepared by a real estate professional, or a list of neighborhood homes that have sold in the past six months, with sales prices, square footage and a description of the condition of the houses
  • photographs of both the interior and exterior of the house
  • a detailed list that includes the lot square footage, interior square footage, number of bathrooms and bedrooms and the square footage of the garage
  • a drawing of the house’s floor plan
  • a list of needed repairs with photographs showing the current condition of the items
  • a list of (and photograph of) anything near your home that impacts its value, such as a landfill, electrical transformer station, busy thoroughfares, airport flight paths and train tracks.
  • a copy of your HUD-1 statement that you received when you closed on the purchase of the home

Consult with your attorney before the hearing to ensure you have all the items necessary and are fully prepared.

Even if you disagree with your assessment, you are still required to pay real estate property taxes when due. Penalties for unpaid property taxes vary by region, but may include penalty and interest charges on the unpaid balance, liens placed against the home and seizure and sale of the property. So pay the property tax bill, even if you plan on appealing it.

{ 3 comments… read them below or add one }

neeraj March 30, 2014 at 7:56 am

I have booked plot under acer scheme in upcoming hitech township with an assurance that the plot will be alloted after 24 months with full advance payment.even. After 36 months builder has not alloted the plot.their is a clause in agreement that if builder fail to allot for any reason builder will pay compensation of Rs.2065000 against my payment of Rs.1200000.i wwish to know that how I have to incorporate such appricistion while computing my income tax


Appealing Property Taxes April 23, 2012 at 6:02 am

The property tax deduction is a tax that can be taken when you file your federal taxes. The amount of money that you pay to your county on property taxes can be deducted from your taxable income when you file your federal taxes. In order to take this deduction, you will have to itemize your deductions. If you do not have enough deductions to exceed the standard deduction amount, you will generally simply take the standard deduction instead. When added together with other itemized deductions, this can help to lower your taxable income and, in turn, the amount of money that you pay in taxes.


New York Apartments April 13, 2012 at 6:56 pm

This article is extremely informative, and helpful… thank you for posting it!


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