A local tax authority such as a county assessor's office or tax board is often responsible for calculating your property tax. For states that have no income tax, property taxes are a principal source of tax revenue. As a result, the state's revenue board is likely to be in charge of property taxes.
Property tax rates cannot be arbitrarily changed. Instead, voters decide property tax rates. Perhaps the best-known example of property tax rates being decided by voters is Proposition 13, a referendum approved by California voters in 1978 to lower their property tax rates. (Housing prices in California remain among the most expensive in the nation.)
Property taxes are often paid twice a year or can be paid pro rata as part of your monthly payment. Property taxes can be deducted from your federal tax return if you itemize your return. Your property tax is often calculated in one of two ways:
- Multiplying a flat amount by a fraction of your home's assessed value.
A common method is to multiply a flat dollar amount by each $1,000 of your home's assessed value. For example, if the tax authority calculates your home's assessed value at $200,000, it would multiply an amount, say $10, by units of $1,000. In this case, the number of units is 200 and your annual property tax bill is $2,000.
- Multiplying a percentage by the total assessed value of your home.
For example, if your tax board uses a rate of 0.5% of assessed value, and your home value is assessed at $150,000, your property tax bill is $750.
Naturally, homeowners dislike hikes in either assessed values or tax rates. In part because of the unpopularity of higher property taxes, assessed values often lag behind the market values of homes. If home prices increase year after year, it's likely that assessed values eventually catch up. An unfortunate consequence of this lag effect is that homeowners get hit with high property-tax bills at times that immediately follow a strong housing market -- often when there is a downturn in the economy.
You may be able to contest your property tax if you can produce market-value data on housing prices in your area to support your claim. You may wish to pay for a current real estate appraisal. An appraisal often uses comparable sales of homes in your area to calculate the market value of your home. If you can show that market values are lower than the assessor's estimate, you may be able to succeed in your claim. Since assessed values are publicly available information, you may find data on assessed values of similar homes to support your claim.
This is not a manifesto on how to protest your property tax bill. Your chance of success in contesting a property tax bill is mixed at best. You may be able to persuade a local tax assessor -- a publicly elected official -- to use tax-assessment data that supports your argument. In states where the state revenue board controls property taxes, you may have to turn to the ballot process to get results (as Californians did with Proposition 13.) You may wish to organize locally and petition to add a property tax initiative to either an upcoming election or a special voter referendum.
