Rental Property Taxes – You Could be Over Paying

Whether you own one rental property or fifty you should take a hard look at your real estate taxes.  And we are not referring to income taxes but rather the rental property taxes.  Many people are not aware that you can “appeal” these taxes and save hundreds to thousands of dollars per year, per property (or more).

Of the investors that are aware of the rental property tax appeal process many assume it would be too cumbersome in both time and research to bother.  Others are intimidated by debating their city and would rather stay “under the radar.”  Here are a few facts that may make this more interesting for you:

1.        It is estimated by industry experts that 65% of all properties are over assessed (both commercial and residential, owner occupied or investment).

2.       Less than 2% of all property owner’s appeal their taxes.

3.       70% of the 2% that appeal win some type of rental property reduction.

These stats came from the National Tax Payers Union.  The first thing to do, is figure out if your city claims that your property is worth more than it actually is.  Don’t let the city’s jargon throw you off with all of their various terms (Many people believe they do this on purpose).  That is what this is all about, i.e. is your property worth less than what they report it is, and what the tax it off of? 

Rental Property Tax – Assessed Value

Every state and city has an assessed value and an assessment ratio.  The ratios vary from state to state and often from town to town.  Some city assessment ratio equals the actual market value (their opinion of it) with others; it’s a percentage of the market value.  A 2 minute call to your city will determine the answer. 

In our home state of Michigan the Assessment Ratio is 50% in every jurisdiction.  So, if our city claimed the assessed value of a property is 0,000 that means they think the market value of the property is 0,000 (.5/0,000). 

Say on that same example that we knew three other properties that where similar, that recently sold for 0,000; we would know that the property was being over taxed and would deserve a property tax reduction.  The savings on that example would look like this.

0,000 (over valued amount) x .50 (the assessment ratio of 50%) = 0,000 over assessed

0,000 x .052 (our local millage rate for rental properties) = ,200 of annual real estate tax savings.  

Rental Property Taxes

Note this annual saving normally goes on year after year.  And if you really learn what you are doing or hire someone that does, you can show an over payment in previous years and potentially qualify for a rebate.  For example if you can prove that you over paid ,000 per year for five years you would technically be owed ,000 from your city.  Also, note that the annual tax savings has an interesting affect on your net operating income, and actually theatrically increases your properties value by getting the reduction on the rental property tax.  It’s found money. 

Are you paying too much in property taxes? Yes…and here’s the proof

Are you paying too much in property taxes? Yes…and here’s the proof

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Home Page > Finance > Taxes > Are you paying too much in property taxes? Yes…and here’s the proof

Are you paying too much in property taxes? Yes…and here’s the proof

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Are you paying too much in property taxes? Yes…and here’s the proof

By: Aaron Bailey

About the Author

Aaron Bailey is a strategy consultant and one of the founders of LowTaxRate.com and The Property Tax Experts, Inc., a national organization of real estate tax experts. All values used for tax revenue calculations used in this article are available from the U.S. Census Bureau website at http://www.census.gov/govs/www/statetax.html

(ArticlesBase SC #930348)

Article Source: http://www.articlesbase.com/ – Are you paying too much in property taxes? Yes…and here’s the proof

By now, everyone has an opinion on the battered American economy:  why it happened, who caused it, and what we should (or shouldn’t) do about it.  There’s one issue that almost all of us agree on though…no one wants to pay higher taxes, whether it’s to bail out the latest corporate behemoth-turned-beggar, or the city and state governments who continually complain about budget shortfalls. 

 

 

Therein lays the problem: we are continuing to pay increasingly higher taxes, even as federal and state budgets wallow in debt.  The common belief is that there’s little (if anything) the average taxpaying citizen can do about this.  “We can vote the bums out of office!” you might say.  Of course, that’s theoretically true, although most of us reading this have seen both government budgets and our taxes increase, regardless of which party is in power.
 

 

With all of the attention on the latest stimulus package beginning to overshadow the headlines about the housing crisis, I decided to take a closer look at where the government is collecting its taxes, and whether the recession has had any impact.  In short, the answer is a resounding “NO!” according to the U.S. Government’s own figures, available on the U.S. Census Bureau website.  In fact, looking at the revenues collected by state governments, taxes are up a whopping 32% over the period covering 2004 to 2008.
 

 

In the short term, it’s easy (and convenient) to believe there really isn’t much we can do about this, aside from cutting down on our trips to the mall or moving our families to some offshore tax haven.  The truth, however, is that there is a relatively easy and legal way to reduce our tax burden, and it’s already written into our local tax laws.  What I’m referring to is our home’s assessed value – that is, the value that the government says our property is worth.  This is the value on which our property taxes are based.  With home prices dropping dramatically across the country, one might think that our local tax assessor would take this into consideration, and then, like magic, we’ll payer fewer taxes this summer.  Technically, this should be the case, but far too often, it’s not.  Even in the event our taxes are reduced, it’s usually a case of “too little…too late”.  
 
 

Let’s turn back again to the Census website, and look at state property tax collections through 2008.  After real estate prices began decreasing rapidly in 2006, you might expect to see a corresponding decrease in the amount of property tax revenues collected. Again, you would be wrong, as tax collections actually increased 3.4% over this period. “But it’s all about the location, right?” you’re probably thinking.  Well, yes, and that’s my point, and why you should make every effort to determine if your home is being properly valued.  By now, you probably think you might be paying too much in property taxes, and in fact, most of us are.
 

 

Let’s use Nevada as an example.  In a state where average property values have fallen more dramatically than John Edwards’ political career, property tax revenues are actually up 14.8% since 2006, and those increases are fairly typical among many states. To be fair, there are a few states that have responded more fairly than others, with Ohio and Rhode Island leading the way.  For the most part, however, the numbers tell a story of government bureaucrats over-assessing the values in their states.  To be sure, of the states that report property tax collection data to the federal government, all but twelve of them have increasing property tax revenues.  Of the other states, the lower tax revenues still aren’t inline with the realities of today’s real estate market.  
 

 

Bottom line: If you are worried about opening your next tax bill and being surprised by how much you’re asked to pay in property taxes, don’t just blame the government.  You have a right to appeal your tax assessment, and it may just save you hundreds or thousands of dollars every year.  
 

 

To see how your state compares, and learn more about your local property tax rates and the appeal process, visit lowtaxrate.com.
 

 

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Aaron Bailey -
About the Author:

Aaron Bailey is a strategy consultant and one of the founders of LowTaxRate.com and The Property Tax Experts, Inc., a national organization of real estate tax experts. All values used for tax revenue calculations used in this article are available from the U.S. Census Bureau website at http://www.census.gov/govs/www/statetax.html

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Is It Even Worth It To Fight A Property Tax Assessment To begin with?

The housing market was once stronger than it is today. Properties are still losing their value fast, despite there being hope that soon the real estate market rates will increase with a strong economy. It’s an unfortunate situation, but there is a silver lining. A drop in home values means your property assessment will also be lowered, lessening the

Many people pay there property taxes in the tax year and claim there taxes on their income taxes for that year. For example, the year 2007, you receive your property tax bill in December and pay the tax immediately. You can then claim the property taxes on your income tax. If your wait until January of 2008, you will have to claim the property taxes for 2008. There are different reasons for paying your taxes right away and there are reasons for waiting until the following year. Deciding when to pay your taxes may be determine by thinking about your current tax liability.

If you are in a higher tax bracket in 2008 than you are in 2007, you may want to wait and pay your property taxes in January of 2008. This will help lower your total tax liability in 2008. If you are in a higher tax bracket for 2007 and expect to drop into a lower tax bracket in 2008, you may wish to pay your property taxes in December of 2007 so you can claim it on your income taxes to reduce the tax liability for 2007. Other reasons to wait or pay your taxes may also include other deductions you may or may not have in a given year.

Everyone has different circumstances for needing to pay property taxes in a given year. If you usually pay your property taxes with an income tax return, you need to make sure that you receive the money before the deadline established by your community. If you fail to pay the taxes on time, you will face a penalty and some interest charges. This is so even if you miss it by one or two days. It is always wise to have an escrow account either established by your mortgage lender or one you have yourself in the bank.

When you pay your property taxes, you should make sure to receive a receipt. This is needed for your tax records as well as showing proof of payment if the community would ever say you still owe money on your taxes. After paying your property tax bill, you can then claim it on that year’s tax return.

People who are low income and can apply for a homestead credit will need a copy of the tax bill to send to the state agency that handles the homestead credit. If two people are on the tax bill and only one is claiming the homestead credit, that person does need to meet the requirements for total income. There are different guidelines to follow for this type of filing. You can submit a homestead credit request even if you did not pay the property tax for the tax year you are claiming. This stated on the homestead form itself.

Now, this may be different for every state, therefore you need to read your homestead form very closely. Some states may require that the property tax is paid and some may not require proof of payment.