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How to Cut Your Property Taxes;

By
Real Estate Agent with Key Realty Group Inc. 200512291
By Kimberly Lankford

From MarketWatch

Question: The rural county where I live has just reassessed real estate values, and my home's assessment more than tripled, as did most others in the country. The assessed value is now more than my most recent property appraisal. Should I appeal? What information would I have to present?

Answer: Go for it. As many as 60% of homes are assessed for too much, estimates Pete Sepp, of the National Taxpayers Union, and about 33% of property-tax appeals succeed.

Procedures vary, but you generally have 30 to 60 days after receiving an assessment notice to file an appeal. Ask the assessor's office for a copy of your property card, which documents the information on which the assessment was based. If the card lists the wrong number of rooms or square footage, for example, you may be able to get your assessment changed without a formal appeal.

If the information is accurate, go to Zillow.com to see how your home's assessment stacks up against others in your neighborhood. If you find that similar homes are assessed at a lower value, you may have a strong case.

If you spot big discrepancies, check your local assessor's office's records for more details on homes with similar features and lower assessments. Or find comparable assessments and explain why your home's value should be lower, says Sepp, whose organization publishes the helpful brochure How to Fight Property Taxes ($6.95). Some jurisdictions also allow you to submit as evidence market-value information, such as your recent appraisal.

Question: My wife and I just bought our first house. Within a week after closing, we found out that you can use your IRA toward a first-time home purchase, and each person can withdraw $10,000 toward "qualified acquisition costs." We have an 80-10-10 mortgage (80% from the first mortgage, 10% second mortgage, 10% down). Can each of us withdraw $10,000 from our IRAs without paying a penalty if we put the money toward paying off the second mortgage?

Answer: Good idea, but the answer is no. You can't take an IRA distribution to pay off any mortgage, regardless of whether it's a first or a second loan.

First-time home buyers (which the IRS defines as anyone who hasn't owned a house within the past two years) can avoid the 10% early-withdrawal penalty only if they use the IRA money to pay qualified acquisition costs for a principal residence before the end of the 120th day after withdrawing the money.

Qualified expenses include acquiring, constructing or rebuilding a residence. Closing costs are covered, but paying off a loan isn't, says Greg Rosica, a tax partner with Ernst & Young. Nor can you withdraw the money after the fact and treat the distribution as though the cash had been used for the down payment you've already made, says Bob D. Scharin of Thomson Tax & Accounting.

For more information about rules for IRA withdrawals, see IRS Publication 590, Individual Retirement Arrangements.

Comments (7)

MAUREEN STACCATO
Springfield, MA
Great information!
May 01, 2007 12:51 PM
Debbie DiFonzo
Debbie DiFonzo - United Country VIP Realty, SW Missouri - Lebanon, MO
Lebanon MO and Buffalo Missouri Real Estate

Interesting information...60% of homes are over assessed.

When I lived in a suburb of Chicago, I would say my assessed value was spot on.

Now, living in rural Missouri, we were just re-assessed. I still feel my home is under valued as are most of the properties in this area. The assessed value is usually half of what a property will sell for.

I pull tax records, double the assessed value and I'm in the ball park. Good deal for tax payers in the county but a bad deal for the schools, library and fire departments that depend on the tax base.

 

May 01, 2007 02:51 PM
Christopher Webster
EXP Realty, LLC - Columbia, SC
Columbia South Carolina Real Estate For Sale
Our values are about half of what homes sell for too. Taxes are right where they should be!
May 01, 2007 03:08 PM
Team Thayer Key Realty Group Inc
Key Realty Group Inc. - Eugene, OR
We will sell your house faster for more money

Not every area is like yours! Though that sounds great! Some areas are over assessed. See enclosed article:

 

Pay close attention to your next property tax bill.

Your home may be worth less than the local tax assessor or taxing agency believes and that could mean a smaller property tax bill.

However, unless the assessor takes it upon himself or herself to perform a wholesale property tax reduction for all properties -- rare, but possible -- it's up to you to appeal your tax bill.

"An overvalued, over assessed property is one of the most common and successful grounds for challenging your tax bill," says Eric Cunliffe, a senior vice president with RealEstate.com.

Generally, when home prices rise, so do property taxes which are tied to a home's value. Conversely, when home values fall, so do those same property taxes.

The problem is, many taxing agencies simply wait until the property is sold or the home owner performs a major value enhancing alteration before reassessing the property.

In the current market, however, the increased incidence of foreclosures would indicate, in some cases, there's not enough value in some properties to cover the mortgage. Some owners, wisely or not, are allowing their homes to go back to the bank.

The housing boom frenzy caused many buyers to bid up the price of the property and artificially inflate the value. In some markets, sellers who purchased homes at the height of the boom and must now sell, are finding they have to price their home to move. That means a price, and possibly, value reduction.

The National Taxpayers Union (NTU) says as many as 60 percent of all homes are over-assessed and not in line with their actual value.

Many errors are clerical mistakes according to the American Homeowners Association (AHA).

The vast majority of homeowners who find errors and contest their bill enjoy a lower property tax, says the AHA, which offers a quiz that points to signals your home could be over assessed.

Tell-tale signs include:

  • Errors in the description of your property on the tax bill.
  • Compatible homes in the area that have sold for less than your appraised value.
  • Neighbors with lower assessments on similar houses. (Keep in mind some homes retain the same assessed value for years and assessed values often don't rise in step with market values or home sale prices.)
  • Value reducers in your home or area, including drainage problems, easements, re-zoning, heavy traffic, nearby railroad tracks, freeways, industry or toxic waste.
  • Depreciation factors, including the quality of materials, inefficient heating, structural cracks, deterioration, or chronic defects.

The AHA, NTU and others offer property tax reduction kits for a fee and while they may be useful tools to help walk you through the process, appealing your property tax is a right you typically can exercise for free.

Beware of official-looking mailings and email come-ons due out any day now offering to do the work for you -- for a fee. Some are scams designed to appeal to nothing more than your sense of dread at going it alone. They want only your money, but not to appeal your property tax assessment.

The Federation of Tax Administrators can point you to your property tax assessor or administrator where you can get all the details you need for appealing your property tax.

Cunliffe says, "The first thing you should do is examine your tax records in the local assessor's office to make sure the information is complete and accurate. To do this, ask yourself the following questions:"

  • Did you buy your home in a bidding war? An overvalued property is an over assessed property.
  • Are there errors in your tax records? Look closely at your records and make sure there aren't reporting errors. A condo listed as a single-family home, an incorrect age, square footage that's off, too many rooms and other descriptive factors could falsely boost assessed value.
  • Do the math. Many states put a cap on how much above the market value an assessment can be and how much it can rise each year.

To appeal the assessed value and related property tax, prepare yourself for a tough process that could require you to appeal an initial rejection.

Also pay close attention to your local rules' period of time when you must complete the complete appeals process.

Cunliffe says, while the process is free if you go it alone, you may need the help of a real estate agent, realty attorney or other licensed professional to assist you gathering some of the information you'll need to make your case.

You'll have to look at comparable homes in your community to determine how much the owners are paying for property taxes. The information is largely public and available from your tax assessor's office.

Cunliffe says you'll typically have to find at least three other comparable homes in your neighborhood that have lower assessments. Obviously, the lower, the better.

A real estate agent or other professional who has access to the multiple listing service can do a comparable market analysis of homes recently sold and in escrow to hone in on your home's true value.

An appraiser with multiple listing service access can do the same, as well as perform an appraisal of your home.

In either case, you could be out a few hundred dollars. Don't make a case if you don't think it's worth the cost to appeal.

The AARP also says some states have programs for property tax deferrals and other programs that let certain home owners postpone payment of some or all property taxes. There are also some tax rebates and exemptions.

Don't forget, property taxes are also one of many home ownership related expenses that qualify for a deduction on your income tax returns. The smaller the tax, the smaller the deduction. <!-- End -->

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May 04, 2007 06:12 AM
Debbie DiFonzo
Debbie DiFonzo - United Country VIP Realty, SW Missouri - Lebanon, MO
Lebanon MO and Buffalo Missouri Real Estate

Thanks for sharing the entire article. I was interested in reading all of it.

I know we're lucky to have low taxes. <G>

 

May 04, 2007 07:15 AM
Kelli Fronabarger
Bend River Realty Inc. - Bend, OR
Realtor - Bend Oregon
Alot of great information here. I'm featuring this post in the Everything Oregon group now : )
May 16, 2007 02:18 PM
Sara Goodwin
Estimation Nation Corporation - Portland, OR
Portland, Oregon Appraiser

Interesting... I used to work at the Assessor's Office in a local county (I won't mention the county as I don't recommend the job ... ) -

At any rate, tax assessed values in the area are typically well below appraised values.  When people contest they're taxes, the Assessor's Office will look to see if 1) they have listed and/or sold their house for more than their assessed tax value or 2) Find comparable properties that have sold for more than the assessed tax value.  If either one of these are found, the property owner will most likely loose the case and in some cases their taxes will actually go up.

I have only known one person that has won a tax assessment trial and that person worked for the Assessor's Office.

Jun 01, 2007 12:41 PM