Property taxes are decided collectively by school boards, town boards, legislators, and councils. The tax rate is set by collating the number of funds an area needs. This is then divided that by the “total taxable” assessed value of the area. The tax an individual pays is computed by multiplying the tax rate by the assessed value of your property and then deducting any applicable exceptions. Property taxes are at an all-time high. Studies indicate that they have increased by more than 35% in five years.
Property is assessed by determining property costs in any given area. Property is valued by studying: the current sale price of properties in the area, costs to be incurred to replace the property, the potential realization of the property if it is rented, sold, or gifted, and the historical value of a property.
There are a few ways in which you could save on taxes:
- Check if the state you reside in is offering any rebates. For example, a money-back rebate, energy rebate, capping of taxes, or homeowners rebate where under certain conditions you may be eligible to claim a rebate.
- Ensure that the property is assessed right. This will ensure that you do not have to pay excess taxes. Assert your right to check your assessment report ensure that there are no miscalculations, mistakes, or assumptions. If in any doubt, do put in an appeal. According to statistics, almost 50% of the cases win some relief.
- Check all exemptions allowed according to the law.
- Buy property jointly with a partner or family member. This way both owners become eligible for tax rebates.
- Check if your assessment is in according to other properties in your neighbourhood. Check with the assessment office or with your neighbours themselves. It helps to know applicable laws. Use the help of a real estate professional to put together a file of properties similar to yours that have a lower assessment. Or, use the bank’s appraisal to support your case. Be sure that the case you gather together is watertight.
- Use a property consultant to help you save taxes. Some charge a flat fee while others just a percentage of what you save. A professional will check how assessment is done and also if there are any loopholes you can use.
- There is strength in numbers. Get together with other owners who are also checking or fighting assessments. Check on the National Taxpayers Union Web site http://www.ntu.org for your rights.
- Ask your home loan provider whether you are eligible for a refund of property taxes paid. Some agreements have a provision for this. Many mortgages have automatic escrow of taxes.
- Even before you buy a home find out what the property taxes are in the area and what have been the increases in tax rates.
- Be sure to read through assessment and tax manuals published by your local authorities. These will give a clear idea of what are the parameters used and what you must do to reduce or pay the correct property taxes.
In order to be money smart, you need to get the help of an efficient and dedicated accountant, plan your tax liabilities well, known thoroughly all aspects of Property Tax. If you are prudent, you can benefit by using ways and means to cut your tax burden and liabilities.