Home values have skyrocketed in 2021, does that mean my tax bill will too?
Skyrocket? No. Increase? Chances are… yes.
Regardless of how the market may be acting, property tax bills are an “ad valorem tax”, meaning a property tax based on estimated value, and would increase due to two factors-
- An increase in a property’s assessed value, or
- An increase in the county’s tax rate.
Fortunately, there are things you can do to contest an increase in a property’s assessed value, but it all starts with a good understanding of how the overall process works.
So, let’s dive in.
1. Property Assessed Values
Property assessed values, or taxable values, are set annually, typically as of January 1st of the current tax year. So, an increase in market value observed throughout the 2021 calendar year won’t affect the assessed value for 2021 tax purposes.
That said, any increases will be included in the valuation in the following property tax year, with a valuation date as of January 1st, 2022.
an increase in market value observed throughout the 2021 calendar year won’t affect the assessed value for 2021 tax purposes.
Now, considering that the market value of most homes across the US have increased significantly over recent years, it is most likely the case that the taxable value has also increased since the January 1st, 2020 value was assessed, which would indicate an increase is still likely for most property tax bills in 2021.
That said, some states only reassess property values every several years, or only when the owner of the property changes. So for states like these, homeowners will only see an increase in the property tax bill following a revaluation year, or if/when they purchase a new home.
It’s always important to be aware of how often reevaluations occur in the state your property is located in. Check your county tax assessor’s website to get more information about your local property tax process.
2. County Tax Rates
Tax rates vary from county to county and are generally voter-approved. The county tax collector or equivalent is tasked with sending out and collecting property tax bills, and can provide the tax rate for your jurisdiction..
It’s important to note property tax rates are set by local taxing jurisdictions. Property tax rates can vary within a county when there are multiple local tax jurisdictions with different property tax rates for different properties based on location within the county.
Local tax jurisdictions can include
- the counties themselves
- local school districts
- special taxing districts like watershed districts
- fire and emergency response
- housing and redevelopment authorities
- and potentially regional development commissions
Many states set limitations on increases in property taxes, property tax rates, and/or revenues that are allowed to be collected at a local level. But property taxes are also a major revenue source for local governments and do fund a large piece of the annual budget.
Keep an eye on local elections and public hearings in your area and advocate for your interests when property tax-related matters come up.
Many states set limitations on increases in property taxes, property tax rates, and/or revenues that are allowed to be collected at a local level.
With rising home values, come rising tax bills. But state and local regulations often work in favor of the long-term property owner.
To those who are aware and willing to appeal overvaluations on their property: strong cases can be made that could lead to property tax savings.
Regardless of the market’s activity, all property owners should have their heads up on county assessments on their property, and whether you choose to take it on yourself or to hire experts to take care of it for you, the first step is being aware when a problem may exist.