Property taxes are not like income taxes in that there’s no schedule to follow to determine your tax liability. Taxing jurisdictions are responsible for assessing the value of real property for tax purposes, and what that assessment entails will vary. In 49 of the 50 states, property taxes are based on fair market value, that is, the price for which the property would sell in its market. Most states include both the cost it would take to replace the building and the property itself into the assessment.
Any owner of real property should consider whether they should have a property value analysis. Reassessments are generally completed on a mass scale using a computer-automated system. As such, the assessment may not reflect the particulars of the property. Property values are generally not determined by a walk-throughs, so the overall conditions of the building and economic factors may not be considered. To determine if you would qualify for an assessment reduction, you should carefully examine your property and contact a qualified expert that the assessed value is accurate.
Crosscheck with Peers
The process for reassessing the value of your property starts with your current property tax assessment. Many of the records are available from the county assessor’s office.
You need to see what the state has determined your property is worth, and then verify that the number mirrors the price set for similar types of property. Property tax assessments are public record, so you should be able to find property tax assessments for locations with similar features to yours. A third party can help you aggregate data to determine if comparable properties have lower assessed values. This step is important, as it will be an important piece of the case for lowering your property tax liability.
Assess the Assessment
Checking your value against those of peers will not be enough, as every property is unique. You need to be thorough in assessing the information covered in the current assessment of your property to determine whether the information is accurate. Is the square footage correct? Are the key features of the building included in the results?
Next, take a fine-tooth comb to your property to determine if the units of property that have the potential to lower your liability are being considered. Identify units of property that have depreciated, such as roofing, elevators or air conditioning units. You should also factor in whether pieces of the property have been damaged due to flooding, hail or other natural elements.
Third parties can help you conduct the assessment. The evaluation should be thorough to ensure that every element of the property is factored into the assessment. For example, if you own an office building, the assessed value of the building should be considering your tenant mix and rent schedule.
Should you determine you want to appeal the assessment, it is recommended you get an advisor with experience in assessing property taxes involved. You are essentially building a case to prove your current assessment does not adequately reflect the value of your property. A third party can assist in the documentation process.
Look for Other Forms of Relief
States offer different types of property tax exemptions, discounts, credits and rebates. When determining if your property tax liability could be reduced, you need to ensure you are taking advantage of all the benefits for which you are eligible. A tax professional experienced in working with the nuances of state and local property tax provisions can assist you in meeting your compliance requirements and coordinating the applicable benefits.
Repeat as Necessary
Businesses in particular should consider having their property evaluated each year, regardless of whether a reassessment is needed. A professional eye can help identify potential sources of lower values and elements that could qualify for property tax relief.
For more information about property taxes, please contact your local CBIZ MHM professional.