3 Reasons Real Estate Taxes Are Too High
Owning a piece of real estate offers property owners many benefits, although many view real estate taxes to not be one of them. It is important to note that real estate taxes are deductible on tax returns; though it is also imperative to ensure a property owner is not paying too much on their taxes. Listed below are 3 common reasons why real estate taxes are too high:
1. Inaccurate information and miscalculations
The tax card for a given property will have all the necessary details that are utilized to help determine the property type and valuation. There is also a possibility for the erroneous values to occur, although it is unlikely due to using a cama model (computer assisted mass appraisal) for valuation. If the tax card is inaccurate that will affect the value, especially in the residential market.
2. Using the cost method to value the property
The comparable sales approach is the most common way to value a property from residential to commercial in a given location. In this method, the subject property is compared with recently sold similar properties. In contrast the cost method takes into account what amount would need to be paid to replace the structure in the present then depreciate based on the actual age of the property. The cost approach may be less appropriate especially if there is an active market for a certain regions as sales transactions that are arms-length have a better representation of fair market value.
3. Stagnant assessments
Many property tax assessments are completed by using the cost method as that information is readily available. This approach can also cause property values to not accurately reflect what the actual market of sales for a certain neighborhood would be. Reevaluation periods for most municipalities will be every five years and at that time qualifying sales will be utilized in assessment of property values. There are some municipalities that complete an annual reevaluation; though that varies from town to town and that does avoid the stale assessed value issue.
Tax payers may be unaware of such tax issues with regards to understanding their property taxes. Allobar Strategies, a property tax consulting firm has ability to assist tax payers with any questions or concerns they may have, with regards to understanding property taxes, and what can be done to ultimately reduce the high real estate tax liability.