The Tax Cuts and Jobs Act (TCJA), passed in December 2017, limited the deduction for state and local taxes (SALT) to $10,000 for most taxpayers and to $5,000 for married taxpayers filing separately. Overall, most taxpayers will pay less in in Federal Income Tax than they would have paid without the TCJA changes to the law. The standard deduction was raised significantly, while the personal exemption was eliminated. Fewer people are itemizing now, but middle-income taxpayers in states with high property taxes, or those that own expensive homes may no longer be able to deduct anything near what they are paying in real property taxes. One way to potentially reduce your overall tax burden is to make sure you are not paying more than your fair share of real estate taxes on your home.
Much has been written about how this “lost” SALT deduction may have been targeted at states that traditionally vote Democratic and have high state and local tax burdens, for example, Maryland, New York, New Jersey, Massachusetts and California. Early data indicates that the negative effect of this SALT deduction limitation is mostly confined to higher income folks with the very top earners bearing most of the cost. That, however, is a discussion for another day.
So, should you appeal your assessment? Most jurisdictions have an assessment period, generate an assessment notice, and give taxpayers a rather limited time to appeal the assessment, often as little as 30-45 days. The appeal process begins with filing an appeal at the local level and the forms are normally available on your local assessor’s website. However, you should do your research well in advance of receiving an assessment notice. Fortunately, most property tax data is now available online. Property taxes are usually assessed as some percentage of market value, with some jurisdictions having variations on this theme.
Familiarize yourself with your local system by reading about the local assessment process, which is usually outlined on the assessor’s website. Then take a good look at your specific assessment and start identifying similar, or comparable, properties and look up their assessments. If your home is in a subdivision, finding the same model of home may not be difficult. If you’re in a more rural or custom home setting, look for comparables with similar square footage, lot size or acreage, and of similar build quality. Look over the assessments of the properties that you believe are comparable and see if they vary from your assessment. Since each parcel or real property is considered unique, small variations are expected, but any variation more than 3-5% is notable. If you note more than a few comparable properties that carry assessments lower than your assessment, then filing an appeal may well be worthwhile.
Improvements, such as elaborate hardscaping, a pool, or the like, will affect the value of the property. Real estate sales in your area are important to review as well. Many jurisdictions offer primary residence, veteran, or similar types of discounts, annual caps or limits on your tax bill. It is important to remember that the assessor’s office determines value, while the treasurer’s office is the collection vehicle in most places. You should make sure your property is receiving whatever such benefits are available to you.
If you decide to file an appeal, here is how the process generally works. After you file an appeal, you will be sent a hearing date. There are likely several CPAs and real estate professionals, generally appraisers, in your area who specialize in helping folks with this process. If the matter is significant enough, an attorney can be hired. However, many homeowners represent themselves. This is not necessarily the best idea, but it can be a good option. Many homeowners are successful, if they are well prepared, do their homework, and can present their case well. However, if you appear at the hearing accompanied by a professional, the appeals board may view your claim more seriously. Yes, I know it is not correct, but it is a factor of human nature to place more gravitas on a party with representation, as having representation sends a signal that you are indeed serious about your position. Having representation also provides a sometimes very useful barrier between the client and the appeals body. Although the process is by its nature adversarial, it is not nearly as formal as a court hearing. In any event, courtesy and decorum are expected. You may be asked questions; be respectful and polite in replies. But be firm in presenting your case and explaining your comparables. Usually, you may bring handouts, or other evidence, to provide to the appeals board.
You may well be notified of the decision right then and there, with a confirmatory notice coming shortly thereafter. In some jurisdictions, the appeals board may elect to deliberate and then send a notice of their decision. If the decision goes against you, you normally have the right to appeal to a statewide board of appeals, and after that it would go to the state court system. Be mindful of any appeal deadlines. Hopefully, this short guide has given you some food for thought on whether appealing your real property taxes is worthwhile or not.