Taxes are just a part of life. The government needs there money and they come up with all sorts of ways to get it. Property taxes are just one way although they vary from state to state.
Property taxes range from an effective rate of .29% in Hawaii on up to a rate of 2.16% in New Jersey (Source USA Today) . Quite a difference but no matter where you fall on the list, you want to pay less. Taxes are never fun and they make up a large portion of our escrow payments.
You might think that there is nothing you can do to fight high property taxes but you would be wrong. There are lots of ways to save money on property tax. Let’s take a look.
How To Get Started Saving On Property Tax
The first thing that you need to do is know how much your home is worth. Property taxes are based on a percentage of your homes value, so having the correct value is crucial to paying the proper amount of taxes.
The best way to get the value of your home is with an appraisal. It will cost you though. The average cost of an appraisal is $300 to $400 which might be worth it. If you think your county is over valuing your home, paying for an appraisal can pay dividend for years to come. It will save you tax money in the current year and years to come. This is because most counties will increase your home by a percentage every year.
If you do not want to get an appraisal, you can look at sales prices of similar homes in the area. This can give you a good idea and some evidence but if you really want to fight the county on the value, an appraisal is the way to go.
Once you have the value of your home, you need to see what the appraisal district is appraising it at. You should receive an annual statement each year. If not, you can contact the county for your value or look it up on their website. Most large counties will have websites where you can look up your property value. You can also see values of homes around you. All you need is an address.
Now that you have the counties valuation of your home and an accurate assessment of the real value, you can move on to the next step.
Dispute Your Home Value
This is the only situation you will ever have that you want to devalue your property. Funny to actually want your home to be worth less but it could save you a lot of tax money. If the amount that the county says your home is worth is higher than your appraisal, you can file a dispute.
First, you should contact your appraisal district and ask about their dispute process. Ask if there is an informal process that you can go through to get the matter corrected. If not, you will need to go the formal route.
You will need to fill out a formal dispute, usually available online at their website, and then appear at a hearing to present your dispute. If you have a solid appraisal in hand, you shouldn’t have a problem getting the valuation changed. Be sure to look at the dispute deadlines. You usually have about three months after your property receives its new valuation to file.
Claim Your Exemptions
There are a number of exemptions that might be available to you. Exemptions exclude a portion of the value of your home from some or all taxes. Homestead exemptions will exclude a set dollar amount if the property in question is your primary residence. It does not work for second homes or income properties.
Depending on where you live, you might have other exemptions available to you. Check with your county to see what is available. The most common additional disability is for those over 65 but others include exemptions for disabled and for veterans. A lot of people forget about these exemptions and leave money on the table. The county will not apply them automatically, you must file for them.
Choosing Property For Lower Property Taxes
If you really want to save money on property tax and your mortgage loan payment, the best way is to choose a home in an area with low taxes. You have a few ways to accomplish this.
Pick A Low Property Tax State
Many of us do not have the luxury of choosing the state we live in. We either need to be by family or have to stay where our jobs are. If you are retiring and can move or are looking for a new job, this might be an option. Look at the average property tax rates in each state and look for the low ones.
There is always a catch though so be careful. If a state has low property tax rates, they might have an income tax that offsets it. In addition, look at the cost of living in a state. Hawaii, for example has the lowest property tax rates but also has a very high cost of living.
Pick A Low Property Tax City
The property tax rates will vary from city to city. The difference between neighboring cities can be tremendous. In general, cities with less big business will have higher property taxes. The city needs to get the money to run and without big business, they need to tax the homeowners more. Check out the appraisal district website in the city where you want to live and compare rates for different cities.
Live Outside City Limits
A third great option if you do not mind a little commute is to live outside city limits. If your home is outside the city limits, you will still pay the county tax and the school district tax but you will not have to pay city taxes. This can be substantial.
A drawback to this is that you might not have city services like trash and sewer. This means dealing with private trash collection services and having a septic system. Not a big deal really, just a consideration.