If you are a homeowner then you have to pay property taxes on top of a mortgage and insurance. Usually, property taxes are calculated by local governments and they are assessed according to the value of your property. So, does every homeowner have to pay the same amount of taxes, or there are differences. Moreover, many homeowners said that their property taxes are higher than their neighbors. So, what’s the reason behind that?
There are many reasons your next-door neighbor’s property tax might be different from your property taxes. Both you and your neighbor might have the same type of house but the property assessment might have happened in different years. This is one of the major reasons for different property taxes in the same neighborhood. Moreover, you might have a higher property tax if there is any home improvement project going on.
Jump To A Section
- 1 Reasons Why Property Tax Can Increase
- 2 If You Move To A New Area
- 3 Home Improvement
- 4 Property Revaluation
- 5 Nearby Home Sales
- 6 Government Policies
- 7 Building New Schools
- 8 Higher Government Budgets
- 9 Ways Of Lowering The Property Taxes
- 10 Understand The Property Tax Bill
- 11 Ask For The Property Tax Card
- 12 Don’t Change The Home Structure
- 13 Look For Exemptions
- 14 Final Thoughts
Reasons Why Property Tax Can Increase
If you are a new homeowner then you need to understand the reasons that can increase your property taxes. Below you will find 6 key reasons that might make your property taxes go up.
If You Move To A New Area
This is a very common reason for your property taxes’ increment. Usually, property taxes rate vary by city, county, and state. For example, in Los Angeles, the baseline for property tax is 1.25 percent. But, this rate actually varies depending on where you live in the county. So, if you want to calculate your property taxes then you have to multiply your property tax rate by the assessed value of your home. Therefore, if you move to a new place, neighborhood, or new state then the calculation will help you understand why your property taxes have increased. Moreover, if you move downtown from a place outside the city limits then you might have to pay an additional amount of property taxes.
Home improvement increases the property tax so if you are redecorating your house then there are chances your property taxes can be higher than your neighbor. Small improvements like the curb appeal of your home won’t increase the property taxes but bigger and more dramatic changes will add more percentages on your property taxes. For example:
1. Installing a pool
2. Constructing a new garage
3. Building a new patio or deck
4. Enclosing an existing patio or porch
5. Building a guest or pool house
Interior home improvement can also increase the property taxes rate. Interior home improvements that can increase the property taxes are –
1. Finishing your basement
2. Remodeling your bathroom
3. Converting a half bath into a full
4. Renovating your kitchen
5. Adding more livable space to your home
6. Renovating your attic
7. Adding a home office
8. Adding a four-seasons room
Sometimes, property revaluation plays an important role in the difference in property taxes between you and your neighbor. Usually, municipalities reevaluate the properties after certain intervals. Assessors visit the neighborhood and do their best to determine the true assessed value of the properties in that area. But you have to understand that the assessors are only responsible for assessments, they have nothing to do with the property taxes. Once the assessments are completed, the taxing units determine the amount of taxes that they require to collect from the homeowners.
Nearby Home Sales
If there are home sales in your neighborhood and they are sold more than the asking price then your property taxes may rise. This is an aspect of property taxes that is out of your hand. Home sales affect the value of other homes in an area, and it is great if you want to sell your house because it increases your house’s value. However, it also means that you have to pay higher property taxes.
Both local and state government hugely depends on property taxes to help fund the maintenance and improvement of various infrastructures and services that include:
2. Water and sewer authorities
3. Street services, like plowing
4. Police and fire departments
If property taxes are decreased then it will affect the development progress of that area. Moreover, the government has to draw more money from other sources and it will increase other taxes rates.
Building New Schools
Schools are very important for a community but the addition of a new school in the neighborhood means an increase in the property taxes. Usually, a new school attracts new families in the neighborhood and it becomes a more desirable location. This will increase the home price, and subsequently, the property taxes. Moreover, if it’s a public school then the government will require an additional budget to run the school. So it also indicates that a property tax rise is on the way.
Higher Government Budgets
This is a very common reason the property tax can increase compared to previous years. If there is a rise in the government employee salary then the government needs extra funds. Therefore, the local or state government might increase the property taxes.
Ways Of Lowering The Property Taxes
Property taxes are important for the development of an area but paying increased property tax is also a burden for the homeowner. There are many ways a homeowner can lower property taxes. Let’s check them out!
Understand The Property Tax Bill
If you think that you are paying increased property tax then you should check your property tax bill to have a clear idea of how you are being taxed. It can be confusing and challenging to understand how property tax works but once you realize how it works then you will be able to minimize the property taxes. The two main factors of a property tax are the tax rate and the current market value of your property. The tax rate is determined by taxing authorities based on state law. Usually, the tax rate is revaluated annually and in some areas once every five years.
Ask For The Property Tax Card
You can request a copy of your property tax cards from the local assessor’s office. From the tax card, you will be able to collect the information of how the town has gathered about their property over time. It also contains information that includes the size of the lot, the precise dimensions of the rooms, and the type of fixtures located within the home. So check the card carefully and see if there are any discrepancies so that you can decrease your property taxes.
Don’t Change The Home Structure
If there are any structural changes made to your home then it will increase your property taxes. For example, a deck, a pool, a large shed, or any other permanent fixture added to your home will increase the tax. So you should check how much of an increase a new addition will make to your property tax before you began the construction. You can call the local building and tax departments to get a clear idea.
Look For Exemptions
You should look for exemptions because there are many ways you can exempt property taxes. However, exemptions don’t just apply to anyone. You will only be able to qualify for an exemption if you fall into certain categories. Some states and municipalities usually lower the property tax rates for –
3. People with certain disabilities
4. Agriculture properties
5. Homestead exemptions
You should consult with the taxing authority of your area to see if you qualify for an exemption.
Finally, if you want to have a decent property tax then you have to make a balance between the desire for a beautiful home with the desire to pay property taxes. Moreover, it is very common to have higher property taxes compared to the neighbor. So if you have a higher property tax than your neighbor then you should try to assess the property of your neighbor and find out the reasons why your property tax is higher than your neighbor.
Magalie D. is a Diploma holder in Public Administration & Management from McGill University of Canada. She shares management tips here in MGTBlog when she has nothing to do and gets some free time after working in a multinational company at Toronto.