PROPERTIES | 04/01/2024
Key Insights for Filing a Real Estate Tax Appeal
Property tax assessments play a critical role in determining your real estate tax obligations, which fund essential community services like education and public safety. However, inaccurate assessments can lead to overpayment of taxes. Understanding the assessment process and knowing how to navigate the appeals process is vital to ensuring a fair valuation of your property.
Understanding Property Assessments and Taxation
Local property assessors determine the value of real estate and, in some cases, business tangible personal property within their jurisdiction. These values are the foundation for calculating property tax rates, which are derived from the jurisdiction’s budgetary needs. For example:
- If a jurisdiction’s total assessed property value is $1 billion and its annual budget is $20 million, the tax rate would be 2%. A property assessed at $1 million would owe $20,000 in taxes.
Assessment cycles vary by state, with most reassessing annually and others on a two-to-five-year cycle. Property owners receive assessment notices and typically have 30 to 60 days to review and contest valuations. Missing an appeal deadline can mean forfeiting significant potential tax savings.
Three Approaches to Property Valuation
Assessors use one or more of the following methods to determine a property’s value:
- Cost Approach
This method estimates the cost of replacing the property with a new one, factoring in depreciation. Key elements include the age, size, and condition of the property. - Market Approach
Also known as the sales comparison approach, this method compares the property to recently sold similar properties, adjusting for differences like location and size. It operates on the principle that buyers will not pay more for a property than for a comparable alternative. - Income Approach
Used primarily for income-generating properties like rental units or commercial buildings, this method evaluates the property’s potential income based on market rates, expenses, and vacancy levels. The resulting net income is capitalized to determine the property’s value.
These valuation approaches form the basis for calculating real estate taxes.
Navigating the Property Tax Appeals Process
If you believe your property assessment is inaccurate, you may appeal the valuation. The appeals process generally includes the following stages:
- Informal Review
Engage with the assessor to present evidence supporting a lower valuation, such as comparable property sales or discrepancies in the assessed data. - Formal Appeal
If informal discussions don’t resolve the issue, file a formal appeal with the local appeals board. This must be done within the designated time frame—typically 30 to 60 days after receiving your assessment notice. Missing this deadline forfeits your right to appeal. - Litigation
As a last resort, you can appeal through the courts. This often involves hiring a property tax attorney and appraisal expert, so a cost-benefit analysis is crucial to determine if the potential savings outweigh the legal expenses.
The Importance of Vigilance and Expertise
Regularly reviewing your property assessments and tax bills is essential. If you suspect your property is overvalued, addressing the issue promptly can prevent overpayment. Accurate valuations can result in significant tax savings, particularly for properties with substantial value.
How Our Tax Consulting Firm Can Help
Our experienced property tax professionals can assist you with every step of the property tax appeals process, including:
- Reviewing your property assessments for potential inaccuracies.
- Identifying whether an appeal is warranted.
- Representing you during informal reviews and formal appeals.
We work with a diverse range of clients, including manufacturers, agribusinesses, nonprofits, and healthcare providers, to achieve fair property valuations and tax savings.
Contact us today to ensure your property tax obligations align with your property’s true value.