The truth about property taxes

Nationwide they are higher, but not as high as many would expect

If you’re like many homeowners, you pay your property taxes monthly via an escrow account handled by your mortgage company, which means this amount is often out of sight and out of mind. But when you take a closer look at your property tax bills mailed to you throughout the year by your local treasurer’s office, you can often experience sticker shock. That’s because property taxes can sometimes jump significantly from one bill to another in a seemingly unfair fashion. Truth is, property taxes can rise or fall based on a variety of justifiable factors, including your home’s assessed value, area real estate market conditions, and the needs of nearby public schools and community services. The good news is that, based on recent data from ATTOM Data Solutions, property taxes were relatively reasonable last year across the country. The report indicates that property taxes levied on single-family residences in 2019 tallied $306.4 billion — a 1% rise from 2018 ($304.6 billion), resulting in an average tax bill of $3,561 for each property. And that equates to an effective tax rate of 1.14%, down from 1.16% observed in 2018. However, that typical $3,561 bill marked a 2% increase from what homeowners paid two years ago ($3,498, on average). That nationwide increase was actually “the smallest in the last three years, a

sign that cities, towns, and counties are taking stronger steps to clamp down on how much they hit up property owners to support schools and local government services,” said Todd Teta, chief product officer for Irvine, California-based ATTOM Data Solutions, in the report. “On balance, 2019 was a relatively mild year for taxpayers around the nation.” Rajeh Saadeh, a real estate attorney in Somerville, New Jersey, subscribes to that theory. “A 2% increase for a particular property would be high, but a 2% average increase nationwide is very reasonable,” Saadeh says. Caleb Liu, a real estate investor and owner of House Simply Sold in Orange, California, agrees. “Most real estate values across the nation mirror the general rate of inflation. So a 2% increase in home values would translate to a 2% increase in property taxes, which is reasonable,” Liu notes. The decrease in the effective tax rate, from 1.16% to 1.14%, is particularly good news for homeowners, insists George Birrell, a Las Vegas-based CPA and owner of Taxhub. “If this trend continues,itwilldrive up demand due to the lower cost of ownership — which will, in the long term, drive up the price of homes.” Saadeh cautions that, while the effective tax rate (often calculated by dividing the annual property tax bill by what someone believes is the market value of the property) is useful in showing how much higher or lower one location’s taxes are from another’s, it doesn’t help in calculating the actual taxes you may pay for your property (calculated by multiplying the general tax rate, set by the government, by the tax assessor’s value of the property). In other words, while the national effective tax rate averages a fairly low 1.14%, your mileage may vary. As for what kind of property tax rate you can expect to pay this year, that remains to be seen. “A similar increase that you’ve seen in recent years is what you should expect in the future, but that will depend on your particular locality,” Saadeh says. Liu says a 2% to 3% spike in property taxes within most markets this year — which would likely track the inflation rate — wouldn’t surprise him. Dimitrios Trivizas, a real estate attorney and owner of Dimitrios P. Trivizas, Ltd. in Skokie, Illinois, specializes in tax assessment appeals and says many X-factors make it challenging to predict property taxes in 2020. “Remember that COVID-19’s economic impact on real estate is ongoing and uncertain,” Trivizassays. If you don’t agree with the numbers after receiving your next assessment notice, you can contest your tax assessment. “First, find out when your county or assessor’s office will publish the ad valorem value of your property and how long thereafter you have to file an appeal against the proposed value,” Trivizas suggests. Before that deadline, “contact your assessor’s office to discuss your property and why you think it was unfairly valued; prepare to explain specific challenges facing your property or inferior aspects compared to similar properties in the neighborhood.” If the assessor isn’t willing to reduce your home’s ad valorem value, “file an appeal and retain legal counsel to help you navigate all the nuances of the property tax appeal process in an attempt to get your valuation lowered and decrease the taxes you will owe,” Trivizas adds.