Because every homeowner who protests their assessments, with an understanding of how the property tax assessment system works, often receives tax savings of $500 to $1000, if not more, annually on their tax bill at the property. Simply put, the property tax bill is calculated by multiplying the homeowner’s assessment by the local property tax rate and subtracting any tax deductions for which the homeowner is eligible.
The Property Tax Doctor can show you how to lower your assessment and therefore lower your property tax bill! The property tax doctor is a former tax assessor who knows firsthand how difficult it is for the average person to penetrate the bureaucratic jungle of the tax assessor who understands arcane terms and practices. No government document does this for the homeowner.
Just like going to a doctor’s office, the first thing you need to do is gather the information you need to do the paperwork. The primary sources of that information are the owner’s property registration card obtained from the appraiser’s office and comparable home sales. Most homeowners armed with one or both of these pieces of information narrow their assessment most of the time without going any further than the local tax assessor’s office.
Just as you ask your doctor informed questions to get some relief from the pain, you should also ask your tax advisor (with the help of the property tax doctor) some informed questions to get some property tax relief. The best advice the property tax doctor can offer is to go to your local tax assessor’s office and check your property registration card for errors of fact! Administrative errors and simple errors occur during the valuation process. Here is a partial list of common errors to check.
1. The dimensions of your house or the dimensions of your land are wrong.
2. Failing to list depreciation under adverse conditions on site or failing to show depreciation or minimum depreciation for an older home.
3. The dimensions of your land are incorrect.
4. Review all calculations, whether or not you understand where the factors come from.
5. Not taking note of off-site influences that depreciate — a factory or landfill that produces toxic fumes.
6. The quality of the upgrades is wrong: you have a stone, not a macadam walkway, or: you have the low-priced hot tub, not the big-name expensive hot tub.
7 Finished areas are listed incorrectly — basement is shown as finished and it is not.
8. The age of the dwelling is incorrectly indicated or the number of floors is incorrect.
My father would not allow the local tax assessor, who was also his best friend, past the kitchen table on our farm. My father feared that he would see some improvements inside the house and raise our appraisal. My father mistakenly believed that the improvements he had made inside the farmhouse, such as a new bathroom sink, drywall repairs, wallpaper, new ceilings, new light fixtures, would increase our appraised value. Likewise, he postponed external repairs until after the next revaluation for fear of further evaluation. Surprisingly, he was wrong. Exterior repairs such as roof replacement, masonry repair, porch repair, steps, stairs, etc. do not increase the owner’s appraisal. Nor the replacement of garage doors, sheds, sidewalks, etc.
Often, establishing the proper combined property value for your home and the land beneath it is the key to your property tax appeal. To win his appeal, the owner must set the value of his property at a lower level than the appraiser used.
To establish the market value, the owner can go to the website http://www.zillow.com to obtain a rough estimate of the value of their home. The site uses a few basic variables like square footage, number of bathrooms, acreage, and number of bedrooms to calculate the home’s market value based on a formula based on other home sales in the neighborhood. Where zillow has the sales data, this is a good first step to see if your house is appraised too high.
In the years after the revaluation year, the owner should find out what the appraisal-to-sales relationship is for their New Jersey taxing district. This ratio is announced each year and is available from your local tax assessor’s office. It represents the average in which the appraisal value of all the properties that were sold in the last year was compared with their sale value in the municipality. Because it is important? It can provide a key factor to show that you have received a disparate assessment and have the right to file a discrimination challenge in the assessment of your property to obtain a tax reduction.
A lopsided appraisal is one that is made at a higher proportion of market value than the average of the other parcels in the roll. A year or so after a revaluation, home inflation often makes the appraisal your tax assessor placed on your home appear low compared to the sales prices of comparable sold homes in your neighborhood. But beware!
A low appraised sales rate in a municipality can mislead some taxpayers into thinking they are being appraised below market value and therefore getting a break. However, if all assessments are set below market value, then the tax rate must be increased to raise the necessary amount of tax revenue. The same amount of tax is collected, but taxpayers are misled into thinking they’ve gotten relief and don’t look for the bad rulings.
Now, don’t forget that the sales assessment rate (or common level rate) is a key factor in getting property tax relief. Let me explain. An important test of the fairness of your appraisal is not just its relationship to market value. It’s also whether or not it’s fair relative to appraisals of other properties in your city. For example, if you have a home with a market value of $800,000, but it’s appraised at $600,000, you may think you’re coming out cheap. However, if your neighbor’s house, which is comparable to yours, is appraised at only $200,000, you are paying three times more real estate taxes than you should!
When your property is under appeal, the County Tax Board can adjust the value of your home to the common level. The taxpayer must know the average proportion in the municipality where the property object of the appeal is located before filing a tax appeal. Remember that the ratio changes annually on October 1, for use in the subsequent tax year. Also, remember that this common level adjustment is not used in the revaluation or revaluation year when all properties have been brought to 100% market value.
Once the County Tax Board determines the true market value of a property, it must automatically compare that true market value to its appraised value. If the ratio of the assessment to the actual value exceeds the average ratio by 15%, the assessment is automatically lowered to the common level. The owner gets his tax relief on the property. But beware! If the ratio of the assessment to the actual value falls below the common level, the County Tax Board is required to raise the assessment to the common level. The homeowner would then get an increase in their property tax. If the evaluation is within the common level range, no adjustment is made.
Each year, on October 1 of the year prior to the tax, the assessor establishes a value for each of the properties in the municipality for the following tax year. The annual appraisal value is considered tried during the public inspection period of the new tax list from January 1 to January 10. The purpose of the inspection period is to allow the taxpayer to determine what appraisals have been made against them and to consult informally with the appraiser about the correctness of the appraisals.
At this point, your approach may be informal and will not require a formal written appeal. Taxpayers have the opportunity only once a year to file a formal property tax appeal. Obtain your tax form for property tax appeal purposes from the County Tax Board website. Generally, it must be received by the County Tax Board on or before April 1 of the tax year. If the taxpayer misses the deadline to file a formal appeal, the taxpayer must wait until the following year to contest any tax relief.
The Property Tax Doctor can help the average homeowner get the tax relief they are entitled to. Under the common level adjustment, described above, the New Jersey statutory standard for an acceptable margin of error in property tax assessment in its calculation is 15%. In New Jersey, where the average homeowner in 2006 paid about $5,000 per year in property taxes, that equates to an acceptable $750 error on the property tax bill. If we administered our Federal Tax bill with that 15% margin of error, we would have a taxpayer revolt.
Gerald Dowgin © 2006