How to calculate and apply for property tax reduction

Property tax reduction is accomplished by claiming your exemptions and property tax appeals / protests. You can protest your property taxes at no cost, with exception of a few states with a property tax protest filing fee. Stop paying more than your fair share of property taxes and reduce your property taxes by claiming a homestead exemption for your residence and protesting your property tax assessment.

Residential property taxes

The largest tax expense for many homeowners are residential property taxes. For each home, the respective county tax assessor generates a guesstimate of market value. Tax assessors use the cost approach to value homes for property taxes, due to limited staff and time to generate many thousands of values in a period of few months. 

How Property Taxes are Calculated

Based on the tax assessor’s guesstimate of market value, exemptions and the assessment ratio, the residential property taxes are calculated.

Summary of each factor in property taxes:

  • Market value – the actual value of your home.
  • Exemption – many tax entities allow either a fixed amount (say $30,000) or a percentage of the assessor’s estimate of market value (say 20%) to be deducted for homesteads.
  • Assessment ratio – most states have a 100% assessment ratio. There are different assessment ratios for different types of property in some states. 
  • Tax rate – the portion of the property’s assessed value will be charged as taxes every year.

Property taxes = ( Assessor’s value x assessment ratio – exemptions) x tax rate

How to Apply for Your Property Tax Reduction

In most states, you have the right to appeal annually. The assessor’s values are not reliable. 

For most of the homeowners in the U.S, property taxes exceed federal income taxes. Property taxes for your home can be negotiated, unlike federal income taxes.

If you search for the property tax deadline for your state, county or township, some states will have a uniform protest deadline. The deadline in Texas is May 15th or 30 days after the notice of value is mailed. Many states allow the county to establish the protest deadline.

File a property tax appeal every year. Remember, every year, the assessor’s values are not reliable. Further, about two-thirds of the appeals are successful. 

Commercial property taxes:

One of the largest expenses for most owners of commercial real estate is commercial property taxes. The commercial property tax is charged forever. The government extracts money and estimates a value each year from commercial property owners unless they appeal. 

How to Calculate Commercial Property Tax

The commercial property taxes are calculated based on the assessor’s estimate of value, the assessment ratio and the tax rate for all relevant tax entities.

  • The assessor’s value is just a guesstimate using the cost approach to value. Cost segregation is the least reliable method of valuation. Most assessor values are not accurate.
  • The assessment ratio is 100% in most states. Some states have an assessment ratio.To determine the taxable value, or assessed value, the assessor’s estimated value is multiplied by the assessment ratio.

Commercial property tax = Assessor value x assessment ratio x tax rate

How to Reduce Commercial Property Taxes

Protest the value of your commercial property annually. Protest each and every year. Protest the value, even if the value did not change and protest both excessive value and unequal value each year. Protest both market value and unequal appraisal annually and reduce property taxes.

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