Homeowner Tips: What to Do When Property Taxes Go Up

 what to do when property tax is raised

Maybe this has happened to you: you’re enjoying the benefits of homeownership, planning your next renovation or color scheme for the living room, when -- bam! -- you get hit with a property tax bill you totally didn’t expect.

Is there anything you can do when your property taxes go up? What caused the property tax on your house to increase, anyways? And maybe most importantly, can you actually do anything about it? We’ll help you sort it out.

Why Property Taxes Go Up

The first thing to ask yourself is, “why have my property taxes increased?” Was it a new construction purchase? A home that’s been remodeled and flipped? A house that was held by the same owner for an extended period? These are all scenarios that will almost always trigger a revaluation, so let’s look at each of these individually.

Property Tax Increase on a Newly Constructed House

With a newly constructed house, the assessment that the closing company has on record is a “lot only” assessment. This just means that the original tax assessment was taking the value of the land into account, but not the value of the house to be built. 

A lot of people don’t realize this, and panic when they get their new tax assessment months later (or in some cases, over a year later). However, that’s just the nature of it: your property tax will inevitably increase when you’ve added significant value -- in this case, your entire home -- to a property.

Property Tax Increase on a Recently Remodeled or Flipped House

When you remodel, add-on, or “flip” an investment property, you’re increasing the value of the home -- which, in turn, increases your property tax amount. Unless the remodel was done so poorly as to cause the value of the house and the neighborhood to drop, it’s pretty safe to assume any home improvements will be adding value to your house.

Property Tax Increase on a Home You’ve Owned for a Long Time

When you have a home for a long time, tax assessors will automatically apply an assessment on the value of your home. They make this assessment based on last year’s assessment, along with factors like inflation and the cost of housing across your area. They won’t normally bother will full-scale real estate appraisals on every house in the municipality, because it would be too expensive and cumbersome to do so.

As a result, if you’ve held the same house for a long time, it may actually increase in value beyond the amount that the assessors have estimated. 

So, let’s say a homeowner has a lovely cottage on a beach somewhere and when they bought it, they spent $350k. The market gets really hot and in five years, that house is worth $600k.

However, the assessment team values that house at $500k, while their house is actually worth $600k. In most cases, people won’t call the tax assessor and confess as much. Instead, they’ll just go on with life, assuming everything’s gold. 

However, let’s say you’re going to buy this beach house from its longtime owner. As as buyer, you see the $500k tax rate and assume that’s going to be your rate. However, when the home is appraised, you find out the hard truth: you’ll actually be taxed on $600k worth of value.

These situations happen often and there’s not much to do about it, because the taxes actually reflect the current value of the home. The real solution should be for tax assessors to have better algorithms and tools to help keep property taxes up to date, but that’s outside of your control as a homeowner.

How to Properly Fight a High Tax Bill

Now, if you have another reason to fight that property tax bill, the burden of proof is on your shoulders. This just means you have to prove that you’re right and the government tax man is wrong.

First, find your real estate tax records at the tax assessor’s office. Check them from top to bottom and ensure that everything is correct. If the square footage, number of outbuildings, or anything else is incorrect, request the record be updated.

Updating the tax data may automatically drop your tax bill back to a rate you’re expecting. But if that doesn’t work and you’re still pretty sure that you’re right, contact that same tax assessor and ask how to contest your bill. Different municipalities have different processes, but they almost always require that you have either a current appraisal, a comparative market analysis from a licensed Realtor, or your sales contract (if the home was recently sold) as proof of value. 

The more evidence you have, the better. However, don’t forget that there’s a ticking clock, so move fast. If you’re not finished before the tax deadline, it’s too bad. No refunds, no returns.

What to Do When Your Home is Re-Appraised

An assessor may come out to actually look at your house, so be prepared for that. If you refuse to let them in, you’re risking even higher taxes because they assume that you’ve got all the goodies and the bells and whistles. 

This process can go on for a while, so dig in for a long fight. If the tax assessor rules in your favor, your tax bill will be reduced, your payment will go down and everybody’s happy. It could happen again, so keep an eye out -- clearly, your tax assessor believes your neighborhood is on the rise!