Property Taxes: If You Aren’t Protesting You Are Paying Too Much
If you haven’t been protesting your annual property taxes, the chances are that you are falling victim to one of the biggest scams in history.
Many states, like Texas, levy annual property taxes on residential and commercial real estate owners. These taxes can have a positive side, but most don’t realize they are dramatically over-charged year after year. Too few know they are being taken advantage of, or that they have options. Most just pay the bill. That means struggling families are being gouged, and real estate investors are giving up a significant portion of their investment returns.
Given that failure to pay your property taxes can result in high financial penalties and foreclosures, this is almost a form of extortion. That would be like if you couldn’t afford to pay for an overblown medical bill for emergency stiches in your finger, and the hospital could take your whole arm as payment, regardless of the fact you are being charged double the going rate.
The good news is that you can protest your property taxes and save thousands of dollars. Reinvest and compound those dollars every year and some may be talking about millions of dollars in difference of what they can leave to the next generation.
Property Taxes 101
Annual property taxes are generally applied on a county level. Bills typically include several layers of charges to cover county, city, and school district fees. The tax revenue collected is meant to pay for public services, education, and special improvements. In places like Miami a portion of these taxes may also be dedicated to help fight homelessness or build affordable housing. These are all good things, though many would argue funds are rarely used efficiently, and are often siphoned off through a variety of questionable schemes and contracts.
Interestingly, many of the most successful and affluent destinations on the planet have a history of not charging annual property taxes. That includes; Dubai, the Dominican Republic, Cayman Islands, Monaco, Liechtenstein, and Israel.
Property taxes are billed based on the local tax rate, and the tax assessed value of your property. This is where the main problem lies. The county property tax assessor typically reviews and assigns an updated assessed value to properties every few years. Sometimes that tends to happen faster when property values are rising, and slower when property values are falling. Tax rates are generally adjusted in the annual budget. So, you tax bill can go up if either you are assessed at a higher figure or the tax rate is raised. Often, you’ll get hit by both at the same time.
There are two major problems with this system:
- Tax assessments can be drastically wrong
- Taxpayers are routinely overcharged, with the expectation they will appeal, though few know they can
The Little-Known Performance Enhancing Tactic for Slashing Property Taxes
There are some potential tax breaks on real estate which may be regularly used by savvy investors and homeowners.
That may include:
- Homestead exemptions
- Depreciation
- Discounts for paying taxes early
- Mortgage interest deductions
- 1031 exchanges
- Using self-directed IRAs
Discover how savvy investors are using these tools to reduce their taxes and boost returns
Find out how to use a 1031 exchange
Learn how self-directed IRAs can boost investment returns by double digits
Smart real estate investors, business owners, and developers also often negotiate big tax breaks, or even years of tax free ownership of credits.
One of the most important, and one which is available to everyone, but is perhaps most overlooked is the ability to protest annual property tax bills. You have the right to challenge, appeal, or ‘grieve’ your bill and assessment. Taxing authorities expect it, which is one of the reasons many really haven’t tried to fix the broken system. Those who are successful may be eligible for not only a lower bill, but tax rebates as well. Typically, the law prohibits authorities from retaliating by increasing taxes when an appeal is made. So, it is a winning play, with no downside.
How Much Difference Can Protesting Make?
According to Housing Wire, property taxes are an almost $300B a year revenue generator racket in the US. An in-depth investigative report by Newsday revealed that in Nassau County, NY revealed that those who have been challenging their property taxes have actually seen their bills go down for the last seven years! This group’s neighbors who did not appeal have seen their tax bills jump up by 50%! Even the government has admitted that as much as 48% of property tax bills in this area are over-inflated EACH YEAR.
If you don’t appeal, you are going to pay more in taxes than your neighbors who do. What’s worse is that between those appeals, and covering for people who don’t pay their property taxes (like many of those zombie bank REOs), you are going to be paying all the extra burden. You could be paying 2-3x your fair share.
Charity is good. Yet, you might find it hard to find anyone who would say that taxing authorities and their contractors and layers of government are the most efficient party to donate to, if you want to have a positive impact. If you can afford to throw away that money, then PLEASE, give it directly to a neighbor in need, pay a struggling family’s tax bill, or donate it to a hospital or children’s clinic.
Besides; if you don’t challenge this, then you are just encouraging the same behavior, year after year. You might as well walk around with a sandwich-board sign on saying “please mug me.” It’s sad, but true. Don’t feel bad about the past, the system was designed to fool you. Just know that you can change the direction of the future, for you, your heirs, and for your neighbors, starting right now.
Left unchecked, you may not just suffer from sub-par investment returns or throwing away cash each year, but see your community begin to suffer from the effects of high property taxes. That means brain-drain and losing talented teachers and physicians, and exodus of younger residents, and ultimately a decline in values which may last for quite a while.
How to Appeal Your Property Taxes
Everyone can appeal their property tax bills and assessments, and should.
The three main options to do this are:
- Appeal yourself directly
- Use an attorney
- Use a specialist property tax adjuster firm
The Dallas News reports that one watchdog’s prescription for treating the property tax epidemic is for everyone to file, and put such pressure on the system that they force change. Given how reliant the system is on this tax revenue, that may not work, but that shouldn’t deter you from getting your own bills corrected.
Property Tax Adjustment Resources:
- Texas Association of Property Tax Professionals
- View your chances of a tax reduction in TX
- New York property tax adjusters
- San Diego property tax appeal experts
- Dallas Central Appraisal District
- Real Property Assessment Appeals (Washington DC)
Summary
Property taxes are some of the most hated taxes out there. This is only made worse by a broken system, which no one is really trying to fix. Meanwhile, as many as 50% of taxpayers are being over-billed annually. You have the right to fight back, and should. Even if you or your heirs do not need the money, you can certainly find a more beneficial way to give it. If you are an investment professional not doing so may even be negligent. While you can attempt this yourself, there are property tax adjustment professionals around the country ready and willing to help you. Take advantage of that. Then learn about other ways you can save on taxes.
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?The original article can be found on https://www.baluchbulletin.com/property-taxes-if-you-arent-protesting-you-are-paying-too-much/