How to Protest Property Taxes Effectively

Managing property taxes is key to maintaining a profitable investment as a landlord. But did you know that property valuation inaccuracies could cost you more than necessary? Learning how to protest property taxes empowers you to challenge these assessments and potentially reduce your tax burden.

So, let's dive into the steps for a successful property tax protest and ensure you're making the most of your valuable investments.

Understanding property valuations and property taxes

Property valuations significantly determine the amount of property taxes you are liable to pay each year. When the local appraisal district values your property, the assessed value is used to calculate your taxes. If you believe it is overvalued and your taxes are too high, you have the right to protest the assessed value.

It's important to note that property tax rates and regulations vary by state. According to data from WalletHub, New Jersey and Illinois are among the states with the highest property tax rates in the United States. New Jersey has the highest average effective property tax rate of 2.47%, while Illinois was close behind at 2.23%. On the other hand, Hawaii and Alabama have the lowest effective real estate tax rates, at 0.29% and 0.41% respectively. 

As a real estate investor, variations in property tax rates can significantly impact your rental property's profitability, especially if you have fixed rental income or limited resources to cover unexpected expenses.

When to consider a property tax protest 

Disagreements with property tax appraisals may arise for a variety of reasons, such as:

• Inaccurate property descriptions: For example, discrepancies in square footage or room count.
• Outdated or incorrect data: The appraisal district may have relied on unsuitable information to determine your property's market value.
• Inconsistency with neighboring properties: The appraised market value might not align with similar properties nearby.
• Impact of external factors: Events like natural disasters or shifts in the local real estate market could necessitate a reevaluation.

It is important to challenge the appraisal if you have concerns about its accuracy. By scrutinizing the appraised value, you can identify errors or inconsistencies that may have led to an inflated property value and higher property taxes.

Pursuing a property tax protest allows you to obtain a more precise valuation, with the goal of reducing your tax liability. 

How to prepare for a property tax protest

When it comes to protesting your property tax appraisal, you are responsible for providing evidence to support your case. Incorporating key data points into your protest will help you create a well-researched and compelling case, increasing your chances of achieving a more accurate property valuation and lowering your property taxes. If you're appealing the tax appraisal for a multifamily property, you will likely need even more data points such as potential income generated.

To prepare a persuasive argument, it is essential to gather specific data beforehand. Here are some key data points to collect:

Current assessed value

Obtain your property's most recent assessed value as determined by the appraisal district. Compare this value to similar properties, highlighting any significant discrepancies.

Comparable property values

Research and collect data on the assessed values of properties in your area that are similar to yours. Analyze recent sale prices of comparable properties to demonstrate how your assessed property value may not correspond with current market conditions.

Recent sale prices

Gather information on the prices of comparable properties recently sold in your neighborhood.

Market trends

Keep abreast of the local real estate market's current trends, as they can influence property values. Use local market trends to show how your particular property value may have been affected by broader shifts in the real estate market.

Property improvements or damages

Record any recent improvements or damages to your property that may impact its value, then present evidence of these changes to support your argument for a revised valuation.

What forms do I need to protest the appraised value?

To effectively protest your property tax appraisal, you must identify the appropriate paperwork for your local appraisal district. The specific forms you need will vary based on your district's requirements, but generally, two common forms are typically used in a property tax protest: the Notice of Protest and the Request for Informal Review form.

The Notice of Protest form is an official document that notifies the appraisal district of your intention to protest the assessed value of your property. Meanwhile, the Request for Informal Review form is a less formal document that requests an informal review of your property's assessed value before a formal hearing is scheduled.

To ensure you complete the correct form and avoid errors, carefully read the instructions and guidelines provided by your local appraisal district. These guidelines will outline the specific requirements for each form and may also specify additional documents or evidence you must submit along with your protest.

Once you have filed your Notice of Protest, you need to be aware of the timeline of events that will follow. First, the appraisal district will schedule an informal hearing to discuss your property's assessed value. This hearing typically occurs within 30 to 60 days of filing your protest.

Can I appoint someone to represent my property tax protest case?

Yes, you can appoint someone to represent you for your protest hearing. This representative can be an attorney, a property tax consultant, or any other qualified individual authorized to practice before the appraisal district or Appraisal Review Board (ARB).

Hiring a representative can be beneficial if you feel unsure about the process or lack the time or resources to prepare a compelling case on your own. A representative can bring valuable experience and expertise to the table, helping you navigate the process and build a strong case for a revised property valuation.

However, it's important to note that hiring a representative can also be costly, and their fees may outweigh any potential savings in property taxes. Additionally, you should exercise caution when choosing a representative, as not all consultants or attorneys may have your best interests in mind.

Ultimately, the decision to hire a representative is a personal one that depends on your circumstances and preferences. Weighing the pros and cons carefully will help you choose a trustworthy, experienced representative who can deliver results.

Attending an informal hearing at an appraisal district office

The purpose of the informal hearing is to provide an opportunity for property owners to present their case for a revised property valuation. This meeting is typically less formal than a formal hearing and can be a chance for property owners to resolve the issue without the need for further appeals.

At the informal hearing, you will have the opportunity to meet with an appraiser from the appraisal district to discuss your property's assessed value. You can present your collected evidence and argue your case for why you believe the assessed value is too high. The appraiser may also provide additional information on how they arrived at the assessed value and may be willing to adjust it if they find your arguments persuasive.

During the informal hearing, be sure to remain professional and respectful. State your case clearly and concisely, and avoid becoming defensive or confrontational. Listen carefully to the appraiser's responses, and be prepared to offer counter-arguments or additional evidence to support your case.

After the hearing, the appraiser will review the evidence presented and may adjust the assessed value if they find your arguments persuasive. If an agreement is reached, a written agreement will be signed, and the case will be closed. If you cannot reach a satisfactory agreement, you will move on to a formal hearing before an ARB, typically within 45 to 90 days of the informal hearing.

What is an appraisal review board (ARB)?

The Appraisal Review Board (ARB) is a group of citizens appointed by the local government to hear property tax protests. An example is theTravis Central Appraisal District in Texas. The ARB's primary function is to serve as an independent and impartial third party in the appeals process. The board is responsible for reviewing any evidence presented by the property owner/ landlord and the appraisal district and finalizing the property's assessed value. The ARB's decision is legally binding and can only be challenged through further legal action.

During the ARB hearing, the property owner and the appraisal district can present evidence supporting their respective positions. The evidence presented will be reviewed, and the property's assessed value will be determined. If the ARB decides in favor of the property owner, the assessed value will be adjusted accordingly, resulting in lower property taxes. If the ARB upholds the appraisal district's assessment, the property owner's tax liability will remain unchanged.

When will I find out about the ARB's decision?

After attending the ARB hearing, the board will deliberate and decide your property's assessed value. The timeline for the decision varies by jurisdiction, but you can typically expect to receive a written notice within a few weeks of the hearing.

Once you receive the decision, carefully review it to determine if you are satisfied with the outcome. If the ARB has lowered your assessed property value, your taxes will be reduced accordingly. However, if the ARB upholds the initial assessed value or only makes a slight reduction, you may disagree with the decision and want to consider further action.

If you do not agree with the final decision, you can file an appeal through either district court or arbitration. The process for each option differs, and understanding the pros and cons of each before proceeding is recommended.

Filing an appeal can potentially be a complex process and may require legal expertise. Consider consulting with a qualified attorney or property tax professional to assist you. Remember, the burden of proof still falls on you to demonstrate why your assessed property value should be revised, so be prepared to provide evidence to support your case.

Appealing property taxes through district court or arbitration

Suppose you disagree with the decision made by the Appraisal Review Board (ARB) and feel that your property's assessed value is still inaccurate. In that case, you may consider further appeals through the district court or arbitration. This decision should be made after careful consideration of the cost and time involved and the strength of your case.

It's important to note that the district court or arbitration should be viewed as a last resort. The process can be lengthy, and the cost of legal representation and court fees can quickly add up. However, pursuing further appeals may be worth the investment if you feel the property value has been greatly overestimated.

Mastering the property tax protest process

With the variations in property tax rates and regulations across states, it's important to stay informed about the property tax landscape in your area.

To successfully protest your property tax appraisal, gather specific data such as your property's assessed value, comparable property values, recent sale prices, market trends, and property improvements or damages. These data points will help you create a well-researched and compelling case, increasing your chances of achieving a more accurate property valuation and lowering your property taxes.

Remember that you have the right to challenge the assessed value if you have concerns about its accuracy. By scrutinizing the appraisal, you can identify errors or inconsistencies that may have led to an inflated property value and higher property taxes. And if you feel you need more time or resources to prepare a compelling case on your own, you can hire a representative to help you navigate the process.

Protesting your taxes can be complex, but being proactive and well-informed can reduce your tax burden and maximize your real estate investment.