DIY Tax Appeals Part I

Like many professionals and their specialties, I sort of fell into one of mine. Because at one time I worked as a tax assessor I became an expert on property tax and tax appeals. Here in New Jersey we have some of the highest property taxes in the United State. There are two primary reasons for this sad state of affairs: (1) we have way too many political divisions (565 municipalities, 603 school districts, 21 counties and one big state government) and (2) we have an over-reliance on property tax to fund schools. But these are debates for another day.

So, at least in New Jersey, property taxes represent real money, usually 2% to 4% of the value of a typical family’s largest asset, every year. So here are some tips and tricks that will help you appeal the assessment on your home.

First, the basics. Keep in mind that you are not appealing the taxes on your home, you are appealing the tax assessment, which is an estimate of the market value of your home.

You have to first figure out where you are by looking up your current assessment. Next, look up the average ratio in your town for the current tax year. With some exceptions, municipalities in New Jersey only perform a complete revaluation when ordered to do so by the County Tax Board. County Tax Boards call for municipalities to revalue when the average ratio gets too low or other statistical models show the assessments to be out of whack. Or, in Essex County, never.

Divide your assessment by the average ratio and viola!, you have your true value.

Next, figure out what your house would sell for today. Some professional help might be in order here. Preliminary, I suggest that you speak with a active and experienced local Realtor. My guess is you already know one. Using the Multiple Listing Service, a Realtor can pull closed sales that are similar to your property. Keep in mind that the value date is October 1st of the pre-tax year. For example, for a 2013 tax appeal, the value date is October 1, 2012. To be safe, choose sales before this date

Tomorrow: Picking Comparable Sales and the mechanics of the appeal.

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