Are You Paying Too Much In Property Taxes?

Did you know that over the last eight years, property taxes have actually outpaced even inflation? Those rising taxes – combined with the recent plateau in house values in some areas – means you may be paying more than your fair share.

If you purchased your house or completed construction on your house since 2004, it is possible and very likely that you are paying too much for your property taxes. Some people who purchased in 2003 may even be affected. The current decline in house values is affecting everyone but some areas are affected more than others.

Under Proposition 13, property taxes can be increased annually by no more than 2% to account for increases in your property’s value due to inflation. Shortly after Proposition 13 was passed, Proposition 8 was passed, which allows a temporary reduction in property tax assessments. Under Proposition 8, a temporary reduction in assessed value can be made when the market value falls below the current assessed value. This is an important distinction because the assessed value may not be the same as the market value. Many counties use a formula which uses a percentage of market value to determine assessed value. Your property’s assessed value is shown in the upper right hand corner of your current tax bill as “Net Taxable Value.”

In practical terms, and with the history of real estate appreciation, most assessed values in San Diego County are well below even current market value. Realistically, this will only affect those property owners who purchased their property at the height of the current real estate market.

If you believe your property’s market value has fallen below its current assessed value you should file an Application for Review of Assessment with the Assessor’s Office as soon possible but no later than May 30, 2008. Click here for easy access to the required forms. Submitting an appeal is generally a fairly simple process, but make sure to take the time to fill out all forms in advance and be prepared with your documentation if there is an in-person hearing that needs to take place. My understanding is that due to the high volume of requests the Assessor’s Office will be notifying property owners in early July of the results of their request.

You can mail or drop off the completed forms to the San Diego County Tax Assessor at 1600 Pacific Highway, Room 103, San Diego, CA, 92101.

A word of caution: If you appeal for a lowered assessment and it is determined by the board that the current market value of your property is actually greater than your current assessed value they can increase your property taxes. The bottom-line here is to compare your current market value to the current assessed value on your tax bill to determine if you are even a candidate before you take any action.

Your appeal must be based on the market value of your property as of January 1 of the year in which you are filing. For example, if you file your appeal in 2008, your appeal must be based on the market value of your property as of January 1, 2008. An application must be filed for each year you disagree with the assessor’s value, even if you have a decline in value appeal pending for a prior year.

If you need current comparable sales to your house you are welcome to send me an e-mail to Shawn@YourFavoriteLender.com with the address in question and I will be happy to forward them to you. You may need to submit proof of the decline in value to the assessor along with your request.

If your appeal is successful, the new assessed value will be used to determine your property taxes for the year appealed. The new assessed value of your property, however, does not automatically become the value for the following year. The assessor is required to review your property’s value annually once a decline in value has been determined. He or she will compare your property’s market value with its base year value plus adjustments for inflation. The base year value is the value of your property at the time of the change in ownership from the seller to you or at the completion of construction. The assessor is required to assess your property at the lower of those two values.

According to the National Taxpayers Union, about 33% of property tax appeals succeed! Taking the time to review the accuracy of your tax bill could easily save hundreds of dollars per year, adding up to thousands of dollars during the time that you own your house. Please feel free to contact me at (619)574-6545 for more information on this money-saving tip.

There are numerous private businesses and individuals mailing solicitations to property owners offering their assistance in this process for a fee ranging from $175 to $300. While you are at liberty to use a company if you wish, you can apply for this reduction yourself at no cost by simply filing the application.