How are Property Taxes Determined?
In the United States, almost all local governments levy property taxes on real property, including land, commercial properties, and residential homes. Property tax burdens are determined by the property tax rate and the tax base, the latter of which is determined by both the assessed value of the property and the assessment ratio (the share of the assessed value that is subject to property taxes). Assessed values can vary with the market value of the property or be based on the value when the property is acquired.
Average county-level residential property tax burdens tend to be close to $1,000 per year, with a small share of states averaging substantially more. Between 2007 and 2011, 60 percent of counties had average tax burdens between $500 and $1,500. Homeowners in about 13 percent of counties paid less, on average, and 27 percent paid more.
Among those counties with higher average tax burdens, few had average annual property tax bills exceeding $4,000. Fewer than 3 percent of counties had average property tax payments of more than $4,000, and just nine counties had average property tax bills of over $8,000. (Urban Institute, TaxPolicyCenter.org)
High Property Tax States
Property tax burdens, measured in dollars, are highest in counties in California, Illinois, and the northeast, reflecting in part high property values. Counties in these areas have mean property tax burdens typically amounting to $3,000 or more. Comparison tax burdens, in dollar terms, can be deceiving as they are mostly driven by variation in housing prices, rather than variation in tax rates. For example, the mean housing value for the ten states with the lowest absolute property tax burden is $127,341, compared with an average house value of $356,085 in the ten states with the highest absolute tax burden.
Property taxes are a major source of revenue for localities in the United States. In 2011, property taxes made up 34.6 percent of total local revenues and 63.9 percent of local own-source revenue (Barnett and Vidal 2013). Property taxes tend to be a stable source of revenue, as many localities set a revenue target to meet expenditure needs and then vary the tax rate to meet this target, conditional on the tax base (total taxable value of real estate). Even in the aftermath of the Great Recession, in which property values in the United States underwent historic declines, property tax revenue fell less than house prices did. After 2008, property taxes as a share of local revenues increased, largely due to the decline in other revenue sources, which responded more quickly to the Great Recession than did property taxes. (Urban Institute, TaxPolicyCenter.org)
The Property Tax Appeal
Appealing Property Taxes: A homeowner or homeowner's authorized representative must prove to the county, with extensive evidence, that the assessed value is inaccurate in relationship to home values in the area. The main method of protest is the valuation argument. The valuation argument utilizes comparable home sales (COMPS) in your immediate area to determine a price per square foot of an extremely similar house. If you can prove that a different, yet very similar house in the same area sold in the past 9 months at a lower value, then you have an argument to lower your assessed property value, subsequently lowering your tax burden.
You will need to fill out a property tax appeal form, meet all deadlines (usually a 15 to 45 day window), provide extensive evidence, and write an abstract of your argument. Make sure to take into account the assessment ratios and to not fight for "lower taxes" rather "lower assessed value" and to equalize your property based on square footage. Be sure to file with the right department and to fill out one protest per unit.
If you would like us to help you with this process, please contact us today in order to beat the deadlines and reduce your property taxes with zero money down!
Douglas County, Nebraska
Lake County, Illinios
King County, Washington
Marin County, California
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