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How do property taxes work?

To figure out how much you owe in property taxes on your real estate, a local official usually starts by finding the value of your property. They may use a few methods to calculate this value, and your local or state laws describe exactly how real estate is valued in your area. The value of your property as set by the local government agency or tax assessor is sometimes called your property's assessment.

After the real estate has been valued, most agencies allow property tax exemptions for certain groups of people. Property tax exemptions may reduce or eliminate the burden of property taxes to make owning a home less costly. You can check your local or state laws to see what exemptions might apply to you in your area. Below are some common property tax exemptions:

  • Senior citizen exemption: reduces property taxes for people of a certain age. This exemption can lower the cost of owning a home for older people on a fixed income.
  • Disability exemption: reduces property taxes for people with disabilities and makes owning a home easier for disabled people on a fixed income.
  • Homestead exemption: a common exemption for people who live on the property full-time.

In most states, property taxes are calculated by subtracting the value of any exemptions from the property value, then multiplying that number by the property tax rate. The property tax rate is typically a certain amount of tax per $1,000 of taxable property value (for example, $2 of tax for every $1,000 of taxable property value). So, suppose we find the property taxes for real estate that has an assessed value of $200,000 with $50,000 in exemptions in a county with a tax rate of $2 per $1,000 of taxable property value. The owner would owe $300 ($200,000 minus $50,000 equals $150,000, which is then multiplied by the property tax rate of 0.002). A government official will do the math and send you a bill.

How do I dispute an error on my property tax assessment?

If you do not agree with the amount of your property tax bill, you may be able to appeal it with your local government agency. Generally, you can ask them to look again at the assessed value of your real estate, exemptions that were rejected or not applied, or an incorrect tax rate. For example, they may have applied a commercial tax rate to your residential property.

The appeals process varies among states, but usually starts with the agency that sent the bill. This is typically a less formal process than a court hearing. Still, it is usually a good idea to talk to a lawyer to see if you need legal help for your specific case. 

What you will need to show during the appeal hearing depends on the area where the property is located and the reason you are appealing. Errors are usually the easiest types of appeals. If the assessor accidentally used the wrong tax rate, got the size of the home or land wrong, or left out exemptions that should clearly apply, those can often be resolved by a phone call, providing documentation, or meeting with the assessor's office.

If you are appealing the assessed value of the property, you may need to show how it is wrong. Some areas will accept real estate appraisals performed by third parties or statements from expert witnesses about the value of the property. Unless you have experience appealing property tax assessments in your area, it is usually best to hire a professional who understands how to prove the error and can help you make a clear argument. Sometimes appealing a property tax assessment can raise the property tax bill instead of lowering it.

Can I appeal my property tax assessment more than once?

The specific laws depend on where the real estate is located, but you will generally start the appeal with the assessor's office or the office of the official who sent the tax bill. Often, the bill includes details about how to appeal the assessment. There is almost always a deadline to appeal to the local government agency, so it is wise to make sure your appeal is filed before that deadline.

If you are not happy with the result after appealing with the local government office, most states have a property tax board that hears disputes between the property owner and the local government office. Again, appeals to the property tax board usually must be made within a certain time. These appeals tend to be more formal, and you may benefit from hiring a lawyer to represent you in an appeal.

If you still do not agree with the assessment after appealing to the property tax board, then most states let you appeal to a state court.

Do I still have to pay my property taxes even though I am disputing the value?

Most agencies require you to pay some or all of your assessed property taxes even if you are disputing the amount of taxes charged. For example, in Indiana, you are typically required to pay the full amount of the prior year's tax bill. In other places, such as Nashville, Tennessee, you usually must pay the amount of your property taxes that you are not disputing in order to file an appeal. Some places, like Clallam County, Washington, require full payment of a property tax bill when it is due, and will issue a refund if an appeal is successful.

It is wise to make sure your property taxes are paid on time, even if you are disputing the assessment. Failure to make the required property tax payment by the due date could lead to fines, interest, and even a tax sale or foreclosure on the property.

Property tax laws are specific to your local area and vary widely across the U.S. It is important to understand how your property taxes are calculated, and to make sure you are not being overcharged.

If you have legal questions about challenging your property tax assessment, or just property taxes generally, reach out to a Rocket Lawyer network attorney for affordable legal advice.

This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.

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