Property Tax Woes
Just when I breathed a sigh of relief that I finished my tax return and sent it in on time, I received a piece of unwanted mail: my property tax notice.
Seriously, the letter was dated April 15th. Not even one day to relax?
Like many of you, my county determined that my property value went way up this year. Therefore they will be collecting much more in the way of property taxes from me.
Our culture doesn’t agree on much right now, but I think we can all agree nobody enjoys paying more and more taxes each year. When budgeting, cutting expenses can be painful, but cutting tax bills definitely does not cause any pain! If I can help clients cut a big expense without having it hurt or alter their lifestyle, I want to do that.
Some financial planners out there preach about the “latte factor.” This is the teaching that if you cut out the daily Starbucks latte and save that money, it can lead to a big pile of money in 30 years. It’s a valid argument, but it doesn’t sound enjoyable to nickel and dime your way to saving for retirement when you could instead focus on much bigger expenses.
To use one of my previous analogies, that would be like digging a hole with a gardening spade. Why not use a pick ax to be more efficient? Instead of chipping away at small expenses, make better progress by cutting down big bills first.
So if I really want to save money and see an impact, I should start with my biggest expenses first. For most people the biggest expenses come down to two items: income taxes and housing expenses.
Your biggest housing expenses are your mortgage and your property taxes. So looking at these two items is the first step in making the biggest savings impact.
So you have this letter in the mail telling you that the taxable value of your home is much higher than last year. Many people don’t realize when your county appraisal district sends you this Notice of Appraised Value, the listed value is not actually set in stone.
You can disagree with the county. And they even encourage it! If you look through the whole letter, they give you instructions on exactly how to “protest” their value.
If you can pull some comparable home sales and justify to the county why their assessed value is higher than what you could actually sell your house for, they may reduce your value and therefore your taxes. Many counties are even letting you submit this information online now instead of physically going to the district office to discuss it with an appraiser.
If you like the idea of protesting your property value but don’t have the time to do the research yourself, there are companies that will do this for you. These companies generally charge you 40% of any tax savings they achieve on your behalf. So if they can’t save you any taxes, you don’t have to pay them anything. I can’t see a downside to protesting the value every year.
In addition to protesting your property valuation, you should also make sure you have all applicable exemptions applied to your property. Most people can apply the Homestead exemption to their property. This reduces the value of your property for some of the taxing entities and also limits how much your property value can be increased each year. There are also exemptions for being over age 65, for having a disability, for having solar panels, etc. Make sure you’re applying all the exemptions you qualify for!
One common misperception I hear is that people don’t want to lower their property tax value because they are afraid it will hurt the resale value of their home. I find that this is not true since most buyers and their real estate agents are looking at comparable sales to determine the home’s value, not the county appraisal district’s website.
If you have questions about your property tax notice, or how to be intentional about the other big expenses in your life, reach out to me! I don’t just advise on investments for clients. I help with every part of your financial life.
