How can I challenge my property tax assessment and tax bill?

Many property owners in this tough economy are faced with a situation where they essentially are overpaying their property taxes because of declining residential values.  Many property owners in the very same development who live in essentially the same type of home may be paying property taxes that are quite different in amounts.

This disparity results from the fact that one property owner may have purchased his or her stucco home at the peak of the real estate market five or six years ago where the county tax assessor valued the property at its purchase price ($500,000) while another property owner with a very similarily styled stucco home purchased it a year or so ago at $285,000. The end result for property tax assessment purposes is that the owner of the $500,000 home will be paying more in property taxes than his $285,000 neighbor.

Take California, for example. As a general rule, property taxes per annum are $1.10 per thousand of the home’s appraised value in the state. In the above example, the annual property tax assessment for the $500,000 home would be $5,500 while the property tax assessment for the nearly identical home purchased for $285,000 would be $3,135.00, a big difference. Furthermore California limits assessment increases to 2% a year and does not bring the assessment up to market value until sale of the home.

The burden of proving that a current property tax assessment is in error rests upon the individual property owner. If a property owner does not contest the tax assessment, the property owner will be stuck with the tax bill. 

How to start the dispute process

Claiming that the property taxes on a home are too high and continue to go each year are not valid challenges.  A property owner should not think that the county tax assessor will on its own reassess his home’s value downward.

To mount a successful and convincing challenge involves time-consuming legwork on the part of the property owner.  The property owner should first get a copy of the property's assessment or record card from the local asessor's or property tax office and closely check the information to make sure there are not reporting discrepancies, such as too many bedrooms or bathrooms, or improper designation as residential, commercial, agricultural or industrial. Square footage may be off, which would artificially boost the value. The area where the property is located is in a neighborhood on the decline due to foreclosed homes, urban decline, drug use, or nearby railroad tracks, freeways or toxic waste dumps. 

Comparable sales figures

To warrant a drop in a property tax bill, the property owner will have to know the tax data (hopefully lower) of recent sales of comparable homes (5 or more) in the same or nearby neighborhood.  Comparable homes mean the same floor plan, age, quality and type of construction, lot size,  improvements, as yours.  This information can be found from online sites such as domania.com. A local real estate agent can also quickly generate a report on comparable home sales.

Another way to determine a home's value is to hire a independent appraiser who can give a written opinion on the property’s current fair market value.

Contacting the assessor

The next step is to lodge your appeal with the local assessor. There will be forms to be filled out to appeal. Gather photographs, the comparable sales analysis, repair estimates/invoices and any other documentation to support the petition for a lower assessment. Write a letter to the local county tax assessor and include the documentation to make the case.  

If the request for a reassessment is not successful, the property owner then submits an application for a review hearing to the county’s board of review for assessment of real property. If the property owner is not satisfied with the decision of the county’s board of review, the property owner should seriously consider consulting with an attorney experienced in tax issues and property valuation.

Commerical or income producing property

Some county tax assessor’s (such as counties in California) have special requirements for assessing income properties such as industrial buildings where documentation demonstrating the property’s income stream needs to be provided to the county tax assessor.