Property taxes play a critical role in helping towns, cities, and states pay for important projects. This necessity doesn’t mean, however, that taxpayers simply must settle for paying.

In some cases, these property owners may feel that they’ve been billed incorrectly. Fortunately, individual property tax laws often give taxpayers the right to seek assessment reviews, pursue formal appeals, or raise legal challenges in court.

The Basics: How Do Property Taxes Work?

Property taxes are typically calculated using “ad valorem” formulas that determine tax bills according to a property’s value and a legally specified tax rate. For instance, in Virginia, different counties impose property taxes on things like real estate, tangible personal property, and tools and machinery. Each place gets to set its own percentage rates for each type of property, and each taxpayer’s total bill is calculated by multiplying the county rate by the total value of the property being taxed. In other words, a piece of personal property taxed at a 5 percent rate and worth $100,000 would generate a tax bill of $5,000.

The Role of Assessments in Determining Base Value

How do tax agencies know what number to multiply by the tax percentage? The key lies in something called an assessment or appraisal.

During assessments, professionals judge the value of a property. These officials typically use one of the following strategies to determine the current worth of land, structures, and other assets:

• In an income approach, an assessor looks at how much income a property could produce if its owner rented it out. These calculations also account for operating, financing, insurance, and maintenance costs.
• With a cost approach, assessors decide how much it would cost to replace the property with something similar considering costs like labor, land value, materials, and utility access.
• In a market approach, unoccupied, residential and agricultural properties are valued based on the prices of similar properties that have recently been sold.

These methods allow assessors to decide each property’s fair market value. Different municipalities also get to determine something called an equalization rate, which is the percentage of the fair market value that actually gets used to determine the property tax. For example, imagine that a home is valued as being worth $100,000. If it’s located in a town that applies a 50 percent equalization rate, then the property tax will be computed based on a final assessed value of $50,000.

Assessments occur according to local tax calendars. After completing these appraisals, tax boards usually mail notices to property owners letting them know important details about their property, how it was assessed, and its determined value.

Other Important Property Tax Factors

Many circumstances can impact an individual’s personal property tax bill. For instance, Virginia’s Prince William County exempts active duty military personnel and their spouses from personal property tax if they’re legal residents of other states. Virginia also lets counties offer prorated taxes. Under this practice, people who move items like cars or boats into tax jurisdictions part of the way through a given year only have to pay taxes for the time when those items were actually in the state.

In California, people who suffer disasters, such as earthquakes, fires, or floods may be eligible to obtain tax relief on properties that are worth at least $10,000. Calamity programs exist in every California locale except Fresno County, and people have 12 months to file such claims with the assessors in their counties.

Can People Challenge or Get a Reassessment If They Believe That Their Property Taxes Are Too High?

With so many factors figuring into the process of computing property taxes, mistakes can occur from time to time. Property owners who think they’ve become the victims of such errors have a few different options.

For instance, in Oklahoma, some disabled veterans and surviving spouses of service members who died in the line of duty are eligible for exemptions that equal their homes’ full fair market value. An assessor who calculates people’s taxes without knowing that they fit into these exemption classes might produce an incorrect bill. From there, the taxpayer can file a protest with the assessor that came up with the appraisal, the local County Board of Equalization, or CBOE, if the assessor denies the original appeal, or the district court if the CBOE review doesn’t go as planned.

Different jurisdictions have distinct appeal procedures. For example, people in Lake County, California, can request reassessments between April 1 and November 30 of any given year to have their property values reappraised for that tax year. These taxpayers may submit their own opinion on the value of their property and evidence that supports their claim, such as information on other property sales that occurred before the annual deadline for consideration. Other possible reasons to seek reviews and appeals include receiving assessments that:

• Calculate a property’s value based on wrong information, like an incorrect lot size or inaccurate feature descriptions,
• Fail to use the correct equalization rate, or
• Calculate property worth based on properties that aren’t comparable, such as homes with substantially different features.

People can try to appeal or dispute their bill as long as they follow their local regulations, but it’s important to understand that these rules can be quite extensive. For instance, in addition to restricting which property sales can be considered for market value comparisons and requesting proof of exemption eligibility, tax boards commonly limit how long people have to file a legal challenge after receiving their assessment letter. Many also charge fees for appeals and reviews.

Although tax appeals can’t lower tax rates, they can help reduce people’s total tax obligation. Before getting started, it’s wise to understand how the process works and what goes into filing.