When home values fall, most homeowners think that they will pay less on property taxes. Unfortunately, that is not always the case. In fact, some homeowners have found that their property tax rates have gone up, despite the fact that their homes are worth less. How does this happen, and is there anything homeowners can do about it?
The Basics of Property Tax Increases
In most states, funds from property taxes are mainly given to local governments. They are then used to pay for schools, roads, police departments, fire departments, and other community services. Local governments depend on the revenue from property taxes to fund many programs, and their financial needs are not reduced when the housing market takes a hit. In order to make up the needed revenue when home values fall, some local governments pass measures to raise property tax rates. By increasing tax rates, they can offset the decline of a weakened housing market and still bring in the money they need to run community programs. This is frustrating for homeowners, and can be a problem for retirees on a fixed income.
Some states do have property tax limits, which are designed to protect property owners from big increases. These limits may still allow taxes to rise, but more gradually from year to year. The specifics of property tax assessments and limits vary from state to state, and are something active adults should consider before relocating to a new home.
In some cases, property taxes may be based on assessments that do not reflect the current housing market. Property taxes are supposed to be based on a home’s fair market value. However, not all counties make property tax assessments every year. They may use the same assessed home values every other year, or even up to every five years. In areas where property taxes are only assessed every three, four, or five years, the assessment may reflect a home value that is not consistent with the current market. This can be a particular problem if the last assessment was done at the peak of the housing bubble, and a new assessment isn’t scheduled until several years later.
What Can Homeowners Do About Property Taxes?
Homeowners who feel that their property tax assessment does not match their home’s fair market value do have the option of appealing the assessment. To see if they may be a good candidate for an appeal, homeowners can start by doing their own assessment of their home by comparing it to recent home sales in the neighborhood or by checking the value at real estate websites. When considering an appeal, homeowners should also look for errors on their property tax assessment. It’s important to check the square footage, the number of bedrooms and bathrooms, and the other specific features listed on the assessment. Errors could lead to a new assessment with a lower tax bill.
While it may seem reasonable to expect that lower home values will equal lower property taxes, that is not always the case. To ensure that you are paying the correct amount of taxes, carefully check over your property tax assessment and don’t be afraid to file an appeal if you find errors or feel that your home has been overassessed.