How to Save Money on Property Taxes

Understanding Property Taxes

Three factors determine your property tax bill: your home's assessed value, its taxable value, and the mill rate your town or city, school district and other authorities use to calculate your tax.

• The assessed value of your home tracks its market value but seldom equals it exactly. It is determined by an assessor employed or contracted by your municipality who evaluates your property based on its size and configuration, condition, location and relative value in comparison with neighboring properties. Counties, cities and towns typically perform valuations on properties in cycles ranging from every three years to every five years.
• The taxable value of your home is the percentage, or assessment ratio, of your home's assessed value that is subject to property tax. In many municipalities, assessed value and taxable value are the same—in other words, the assessment ratio is 100%—but some authorities tax a lower percentage of the assessed value.
• The mill rate is the number of dollars you are charged in tax per thousand dollars of your home's taxable value. It is expressed as a simple number such as 16 or 18.5 (not as a percentage). To calculate your tax, divide the mill rate by 1,000 and then multiply the result by your home's taxable value.

As an example, consider a home with an assessed value of $400,000 in a town with a mill rate of 17 that applies an 80% assessment ratio:

Mill rate = 17/1000 = 0.017

Taxable value = 80% x $400,000 = $320,000

Property tax = 0.017 x $320,000 = $5,440

An increase to any of these factors—assessed value, assessment ratio or mill rate—will hike your property taxes.

Why Are Property Taxes Going Up?

What's driving most recent property tax increases is growth in assessed property values, in line with surging home values across the country. Rising home prices lead to increased assessments, which in turn increase property tax bills. The average property tax on a single-family home in the U.S. increased 4.41% in 2020, to $3,719, according to ATTOM Data Solutions, a provider of national real estate data and analytics.

Some 55% of the 220 metropolitan statistical areas analyzed by ATTOM Data Solutions saw average property tax increases greater than the national average, including seven metro areas whose property taxes were 10% or greater:

• Salt Lake City: +11.4%
• San Francisco: +11.1%
• San Jose, California: +10.8%
• Seattle: +10.3%
• Atlanta: +10.2%
• San Diego: +10.2%
• Tampa, Florida: +10%

While few homeowners would want to halt rising property values, the wealth gains they bring typically aren't felt until it's time to sell the house (or borrow against it). Increasing property taxes, on the other hand, can put an immediate strain on household budgets. If you're in that situation, you're not alone. Here are five tips that could help you reduce your tax bite.

Review Your Property Tax Card

Your local tax assessor can (and must) furnish you with a copy of your tax card, which reflects the information used to determine your property's assessed value.

Review Your Neighbors' Property Tax Cards

Tax cards are public records, so you can check your assessment against those of your neighbors to see if they sync up. Look for disparities—either comparable properties to your own that are assigned lower assessed values or properties with assessments close to yours that offer significant structural enhancements when compared with your home (for example, a second-story addition on a ranch house, a garage instead of a carport, etc.). If you find clear discrepancies in assessed values, you have a good chance of appealing your assessment.

Show the Tax Assessor Around

When assessors perform revaluations, they may or may not attempt to visit your home to check the status of its interior. If they do not view the interior, they may make assumptions about the value of appliances and other structural features, and that could inflate your home's assessed value.

If you know a revaluation is scheduled, or if you're appealing your assessment, be sure to do a walk-through of the home with your assessor so you can let them know about things like that 15-year-old furnace and the unfinished basement that could offset some of your assessed value. Bear in mind, however, that the assessor will also take into account recent renovations, and those could influence the assessment in the other direction.

Apply for Tax Credits and Exemptions

Some states and municipalities offer property tax relief in the form of credits and exemptions based on:

• Age: Senior citizens (as defined according to local law) may be spared part of their property tax obligation.
• Military service: Veterans and current service members may be eligible for property tax breaks.
• Homestead exemption: Laws in some states shield surviving spouses of primary breadwinners from certain tax obligations.
• Disabilities: If you or another resident of your home is a person with disabilities, you may qualify for a reduction in your property taxes.
• Special-use properties: If your home is on agricultural property or is used for nonprofit or religious charitable activities, property tax exemptions could apply.

Avoid Major Improvements

If you know your municipality has scheduled a property revaluation, consider postponing major renovations to your home until after the new assessments have been determined. Repairs such as painting or replacing a roof won't affect assessments, but structural changes such as new decks or patios, outbuildings including sheds, and other additions will likely increase assessed value.

The Bottom Line

While it can be nerve-wracking to navigate the property tax hikes that accompany rising property values, take comfort in knowing it's a side effect of your home becoming more valuable. If you have a mortgage on the property, your equity stake is likely increasing as well.

If you eventually decide to harvest those gains and buy another home—one with more room to grow, perhaps, or maybe a sensible downsize—make sure to spruce up your credit for your next mortgage application as you prep your property for sale, and enjoy the benefits of property appreciation. You can check your Experian credit report and score for free to see where you stand.