How To Prepare for Rising Property Taxes

Your property tax bill isn’t set in stone

Man and woman looking over a spreadsheet in an office setting
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Maybe you invested in some renovations to increase your home’s value, or your neighborhood was recently named a “best place to live.” While those are positives, there could be a not-so-great consequence: your property taxes may rise.  

There are many reasons why property taxes increase, and you can’t always control them. One thing you can control, however, is how you prepare. Read on to learn how to get ready for rising property taxes and what to do to help keep them down.

Key Takeaways

  • Property taxes are based on the assessed value of your home and local tax rates.
  • You might have to pay more in property taxes if your home’s value increases or your municipality needs to raise funds.
  • Keeping tabs on local property values can help you evaluate whether you’re being taxed fairly.
  • If you don’t agree with an assessor’s valuation of your property, you can contest it.
  • There are other ways to lower your property taxes, such as through exemptions and abatements.

Why Do Property Taxes Increase?

Property taxes are an “ad valorem” tax. That means they’re applied based on the estimated value of a property, explained Frank DiZenzo, a CPA and co-founder of realAppeal, a property tax appeal service, in an email to The Balance. That value is then multiplied by the local tax rate, which can vary by state, county, city or district. 

“Property tax rates can vary within a county when there are multiple local tax jurisdictions with different property tax rates for different properties based on location within the county,” DiZenzo added.

Property taxes typically increase when either the assessed value of a property increases or property tax rates in the taxing jurisdiction increase, or both.

For example, property taxes might go up if the local schools are underfunded. “Increasing taxes for homeowners can be a major source of funding when governments put money into school programs and renovations,” said Christopher Brown, principal and broker of Next New Homes and Next Real Estate Group, in an email to The Balance.

The coronavirus-related economic slump has also made funding scarce at a time when some public services like education, health care, and emergency services are working especially hard, he added. “City governments may turn to property tax increases for money as federal aid isn’t sufficient to meet their needs.”

Your home’s value could also increase, triggering higher taxes once the property is professionally reassessed. For example, performing renovations such as adding a room or installing hardwood floors could result in higher property taxes. 

Brown noted that how much your own individual assessment could change depends largely on where you live. In California, for instance, property tax hikes are capped at 2% per year in most cases, while Nashville, Tennessee is making headlines for its double-digit property tax hike.

How To Prepare for Rising Property Taxes

DiZenzo said it’s important for property owners to be proactive so they can manage and minimize the impact of rising property tax expenses. “Property owners should become familiar with their county’s assessment process and schedule,” he said. 

If you learn that property taxes are increasing, there are a couple of steps you should take next.

Research Comparable Property Values

If property taxes are going up because your home’s value was assessed higher, it’s important to make sure that number is accurate. Getting an idea of what comparable homes in the area have been valued can help you make that determination. Information regarding what other homes are worth can often be found in public records by searching the county recorder’s office website. You may also want to get a second opinion by hiring your own appraiser, Brown added.

The average cost of a home appraisal is $300-$500.

Adjust Your Budget for Higher Tax Costs

Property taxes often aren’t cheap, and failing to pay them can result in penalties or even losing your home. So it’s important to be sure your budget has room for any increase.

You can estimate your property tax bill with the following formula: Assessed Value x Tax Rate = Property Tax Due.

For example, if your home’s latest assessed market value is $200,000 and the effective tax rate is 1%, you will need to budget for an annual tax bill of $2,000. This might require cutting some costs elsewhere, such as canceling unused subscriptions or downgrading services.

How To Get Lower Property Tax Rates

There are some steps you may be able to take to lower your property assessment and offset any tax hikes.

File an Appeal

Your property’s value isn’t necessarily written in stone. “In some cases, you may disagree with your local government on your home’s assessed value and what that means for your tax bill,” Brown said. “If that happens to you, you have recourse to challenge the assessed valuation.” 

Brown noted that your tax assessor or local tax authority should be able to provide you with information on their specific dispute process. Be sure to note any deadlines for filing your appeal.

Successfully appealing an assessment may only result in lowering your home’s assessed value, not the effective tax rate. In order to contest your tax rate, you will need to address the matter with your local tax jurisdiction. 

Delay Home Renovations

Making valuable upgrades to your home (outside of regular maintenance) is one way to increase the sale price and potentially earn a higher profit. However, if you’re going to stay in your home for many more years, it can be worth it to wait on any renovations and keep your home’s assessed value down.

Look Into Exemptions and Abatements

If you need help paying property taxes, find out if you qualify for any exemptions. These reduce the amount of property tax you owe and are available to seniors, veterans, disabled homeowners, and more. “Exemptions are one of the most effective ways for a property owner to reduce their property taxes,” DiZenzo said. 

You can also check whether you qualify for an abatement, which also lowers or eliminates your tax burden based on certain factors.

Frequently Asked Questions (FAQs)

Is there a limit to how much a tax authority can increase your property taxes every year?

Whether or not there’s a limit on property tax hikes depends on where you live. Currently, 46 states and Washington, D.C., have some sort of limit in place. These restrictions fall into three categories: assessment limits, levy limits, and rate limits. The rules and restrictiveness vary from state to state.

How do I find out how much property tax I owe?

You can usually look up your property tax bill by visiting your county’s tax website. You’ll need to submit some basic personal information, such as the property’s mailing address.

What happens if you don’t pay property taxes?

Every real estate owner is required to pay property taxes. Failing to do so can have significant consequences. Generally, being overdue on your property taxes results in being charged penalties. If you remain delinquent on your taxes, the county can put a lien on your property. Eventually, that mortgage lien can lead to foreclosure.

Article Sources

  1. Tennessean. “Nashville Approves New Budget With 34% Tax Hike, More Funds for Police, Schools.” Accessed Feb. 4, 2022. 

  2. Sacramento County. “Proposition 13 and Real Property Assessments.” Accessed Feb. 4, 2022.

  3. National Association of Realtors. “Upfront Cost of Buying a Home.” Accessed Feb. 4, 2022. 

  4. City & County of San Francisco Office of the Assessor-Recorder. “Property Tax 100 for New Homeowners.” Accessed Feb 4, 2022. 

  5. Tax Foundation. “Property Tax Limitation Regimes: A Primer.” Accessed Feb. 4, 2022.