With the recent slump in the housing market, and property values taking a dive all over the country, many are left to wonder why property taxes have not followed suit. Unfortunately what may be good news for some is bad news for many more.
Places such as Durham, N.C., counties in and around Cleveland, and a five-county area surrounding Los Angeles are all in for some kind of property tax decrease. But in many of the areas around Seattle, in suburbs of Washington D.C. and in the state of Minnesota, homeowners are seeing their property taxes rise.
Assessors in the state of California are in the process of revaluating property taxes for those who purchased a home during the market’s peak between 2005 and 2006, according to the Los Angeles Times. Those homeowners can expect a break of anywhere from $700 to more than $1,200 annually.
Homeowners who didn’t purchase within the selected window, or any homeowner around the country feeling the burden of high property taxes, can file a review at any time with a local assessor to try to adjust their tax rates.
Florida is a state that has been hard hit by the real estate slump, but in Miami County, some residents might see relief from property taxes that have stayed steady even as property prices have bottomed out. Miami County Council President Ralph Duckwall proposed a recent local option income tax, 0.3 percent of which would go toward property tax relief for individual homeowners, according to the Kokomo Tribune. The proposed tax goes to a vote July 16, and if adopted, would go into effect Oct. 1.
In addition, property tax caps have been set statewide in Florida at 1 percent for residential properties, 2 percent for rental properties and 3 percent for all other properties. Non-Florida residents who own property in the state are not eligible for most of Florida’s property tax protections, according to the Wall Street Journal.
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Homeowners can file a review at any time to potentially adjust their tax rates| alt=|Declining home values could mean lower property taxes for some|]But while certain areas anxiously await a tax decrease that will lighten at least some of the burden, other areas are left to wonder why rates are continuing to increase.
A large part of the problem is the state-by-state, county-by-county differences in how property taxes are assessed. In New York City, taxes are assessed each year; in contrast, Wake County, N.C. assesses its property taxes every eight years, according to TheStreet.com.
Stringent guidelines are having a negative effect on homeowners in Washington state’s King County, the state’s most populous county and home to the city of Seattle. Assessors in King County aren’t seeing many decreases in property values, which are based on the values of sales from the previous three years, according to the Seattle Post-Intelligencer. Thus, it may take a few a years for recent changes in the market to be reflected. Property taxes, in turn, haven’t decreased, but they also haven’t increased as high as they have in previous years. Still, that is little consolation to the state’s homeowners, especially when the prices of so many other things are increasing as well.
The state of New Hampshire’s homeowners are also victim of the policy of using past property values. New Hampshire’s assessors reevaluate tax rates once every five years and did so as recently as 2006, which just so happened to be at the housing market’s peak.
Although some areas are proactively lowering property taxes to coincide with current market conditions, experts warn that assessors typically don’t consider current market conditions, and just because homeowners can’t pay their mortgage doesn’t mean the property value has declined, according to TheStreet.com.
The only way for homeowners to successfully lower their property taxes is to win an appeal with the assessor’s office. Learning how the appeal process works, and accurately documenting the facts and information needed to prove that the property taxes are indeed too high, will greatly improve the chances of a successful appeal, according CBS News.
Another important part of the problem is the large role property taxes play in funding local governments, schools, roads and other services, according to USA Today. Lowering taxes has obvious consequences, as cities will struggle to maintain affording a variety of services as homeowners ask for more breaks. For more information on this, see our previous blog post on cuts in local government budgets.
Median home prices began to fall in the latter part of 2006 and early 2007 while property tax collections were at an all-time high, a disparity that is likely to continue. It can take several years for a home’s tax value to meet its market value, according to USA Today, which again spells bad news for areas still paying higher-than-usual property taxes.
So while some may be lucky enough to experience a break in their property taxes, others will have to wait as the market continues to work out its own kinks; in the meantime, many homeowners will be left to either appeal their property taxes or just pay the high price.