If you anticipate a silver lining in the black cloud of declining home prices -- in the form of lower property-tax bills -- you may be disappointed. The National Taxpayers Union figures that as much as 60% of taxable property in the U.S. is overassessed, largely because assessment cycles haven't caught up with the decline in home values.
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In California, for example, a home's assessed value is based on its purchase price, plus increases of up to 2% annually. The house isn't revalued until it's sold again. To capture the price plunge of the past few years, homeowners must file an appeal and prove that their home's assessed value exceeds its market value. In San Diego County, the assessor's office processed 80,000 appeals in 2008; the average reduction in assessed value so far is $110,000, equivalent to a tax cut of $1,200.
Many jurisdictions calculate a home's assessed value as a fraction of its market value, so do the math to make sure your home is priced fairly. Also verify that you have received any breaks you're entitled to, such as a homestead exemption or a reduction for seniors or veterans.
How to appeal. Go to the assessor's Web site or office to double-check the "property card" and any working papers for your home. Are the figures for square footage and number of bedrooms and bathrooms correct? Has the assessor accounted for any features that could detract from your home's value, such as an irregularly sized lot or a carport instead of a garage? Pull the property cards for five or ten neighboring homes that are similar in terms of age, style and features. If the assessments on similar properties are a lot lower -- 10% or more -- you have a good case based on uniformity.
Otherwise, if you believe your home's assessed value exceeds its market value, you'll have to provide sales-price data for several comparable homes. You can get that information from a real estate agent, or check the local public library or your county assessor's or county clerk's office. Ask the assessor whether a recent appraisal for, say, a refinancing is acceptable proof of your home's market value.
Two chances. Read your assessment letter for details on how to appeal. You'll probably have two windows of opportunity: During the first, you may request a reduction in the assessed value of your home for the forthcoming tax bill. During the second, you may appeal for a retroactive reduction and refund.
Until your appeal is resolved, pay your tax bill in full to avoid incurring penalties and a lien against your home. As a last resort, you could go to court, but that's an expensive process usually best suited for commercial property owners with more at stake.
You may see advertisements for companies that will help you appeal your assessment, often in exchange for about half of any savings on your tax bill. But with the right preparation, you can probably do just as well yourself using a guide such as How to Fight Property Taxes ($6.95), from the National Taxpayers Union. The NTU's Web site also has links to state and local taxpayer associations that may offer further insight into the appeals process.