When April 15th rolls around and income taxes are due, the last thing most people want to do is dig deep into their bank account to send lots of money to the taxman. The same is true when it comes time to pay property tax. Many homeowners think their annual assessment is something they must grin and bear, but here are 12 legal ways to lower your tax bill.
1. File a homestead exemption
Nearly every state offers taxpayers some sort of homestead exemption that reduces taxes on a person’s primary residence. Some cut a flat amount from the assessed value, while others reduce assessments on a percentage basis. You may need to provide some proof to local tax authorities that you actually live in the property full-time (or close to it) to qualify.
2. Apply for local property tax relief
Some localities offer income-based tax relief programs that can reduce a homeowner’s tax bill to zero. For example, low-income homeowners and renters in some areas can receive a portion of their rent back at income tax time.
3. Examine your bill
Tax bills should accurately list the square footage, room counts, and improvements. If you find an extra bathroom or bedroom or a few hundred square feet tacked onto your property, call the tax office and follow the steps to correct it (and ask for another assessment).
4. Appeal your property tax assessment
Mistakes involving your property size or features aren’t the only things that can artificially inflate your bill. As the price of homes rises around you, it can affect your property taxes, too. If you feel your home’s valuation reflects your neighbor’s property more than yours, you can appeal. Be ready to offer an independent appraisal or recent comparable sales to support your case.
5. Don’t overimprove your home
More than half of millennials are now homeowners, and the urge to personalize their homes is strong. But before you dive into that kitchen remodel or add a multistory deck, consider your home’s value and comparable homes in the neighborhood. Sure, relaxing under the stars on your rooftop deck is nice, but it can bump up your property tax bill and may not offer a full return on your investment when it’s time to sell.
6. Ask for a reassessment when the market slumps
If you suspect a market slump has caused your home’s value to drop since last year, contact your tax office and ask for a reassessment. Property taxes are factored based on a property’s real market value, and normal swings in the market can seriously affect your tax bill.
7. Join (or create) a property owner’s group
Improvements and new amenities in previously depressed areas can cause property taxes to soar. This is good news for developers who swooped in and bought property at rock-bottom prices. But homeowners who want to stay in their homes have options. Join or create a homeowners’ group to combat and appeal inflated property tax rates. Local homeowners may be able to exert more influence over their city government and tax situation together than they would be alone.
8. Apply for conservation, agriculture, or timber use
This strategy may not apply to all properties (especially in urban or highly developed suburban areas), but some homeowners can convert their property to conservation, agricultural, or timber designations. The discount and restrictions that come with these exemptions differ depending on the location and the amount of land, but it’s worth looking into if property taxes become too much to handle.
9. Hire a property tax consultant
Taxes are complicated and often confusing. If you find yourself completely mystified, consider hiring a property tax consultant. They specialize in lowering property tax bills and often only charge a percentage of what they save you, avoiding the worry over wasting upfront costs.
10. Look for senior discounts
Older homeowners may benefit from lower property tax rates available to seniors. Check with your local tax office to see if special rates for seniors exist and how old you must be to apply. Seniors can also look for special non-government programs run by nonprofits and others offering property tax assistance when discounts are unavailable.
11. Ask about discounts for veterans and those living with a disability
Veterans and those living with a disability may also be eligible for discounts on their property tax bill or their home’s assessed value. These programs vary depending on where you live, so check with your state and local tax office to see what’s available.
12. Pack up and head out
In some cases, moving is the only remedy for a high property tax bill. This is a dramatic response, but it can yield dramatic results. You may not have to go far; moving to the other side of the city line can sometimes provide all the amenities of one area but with big tax breaks of another.
If moving is the only option, don’t rush it. Selling your house before you’ve lived in it for two years may mean a hefty capital gains tax, but only if your profit exceeds certain limits ($250,000 for singles and $500,000 for couples filing jointly).
***We are not accountants, please consult your accountant with further questions on how to manage your taxes.***
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