So far in the history of real estate investing, property taxes is one of the most frustrating expenses for homeowners and investors investing in income properties. This frustration builds yearly, as the taxes increases. Unfortunately, property taxes are an unavoidable aspect of owning a home whether for residential or investment purposes. And, just so you know, you’ll still be responsible for them once you clear off your mortgage. The amount you have to pay depends on some factors, however, you can learn how to reduce your taxes on your income properties.
While property taxes are necessary expenses, investors and homeowners shouldn’t be overpaying whenever they are going to. However, before you can succeed in reducing your property taxes to the barest minimum, you must understand how property taxes are calculated. Read on, and learn the basic things you need to know about property taxes on your income properties.
What are Property Taxes?
Property taxes are a yearly cost paid for by individuals, businesses, or other legal organizations who own properties/houses. Property taxes are an ad valorem tax, which means that the amount required depends on the asset’s value. Unfortunately, property taxes can also be considered by many investors and homeowners as a regressive tax because they are not dependent on the income of the individual, business, or organization. WalletHub estimated that an average household pays about $2,375 annually as their property tax.
Property tax rates will vary based on the location of your income properties. This is because this type of tax is set on a state and local level. And unfortunately, in some states and local areas, your personal properties such as yacht and cars can be considered under your property taxes. And in some areas, it might even include any other landed property you own, whether it has a structure or not. This is more reason why smart investor spends quality time researching about an areas property tax laws before acquiring income properties for their investment portfolio.
Simple Steps to reduce taxes on your Income properties
Are you about to acquire some income properties, and you are scared high property taxes might be a limitation to your profit generation? Or are you thinking your profit taxes might have been inflated, causing you to lose big on your income properties? Are you ready to try something out to see if you’re not being cheated of your income properties? Here are five simple steps that can help you become a tax ninja for your real estate properties:
Get Your Property Tax Card
Do you know that you can actually request for your property tax card as a homeowner/investor? It is the first step to evaluating your property tax. This card will have sufficient information about the size of the lot, square footage and room sizes, and the type of fixtures the income properties have. The property tax card will also typically include a record of any major renovations or upgrades. As an investor or homeowner, you can ask for this record if you suspect there are any discrepancies. This is the first step to correcting any mistake that could have happened with your property tax.
Compare With Neighbors & Similar Homes
Just as you can request your property tax information, you can also request other property assessments in your area. Shocked right? In most neighbourhoods and counties like Pinellas, this information is easily accessible at the town hall. If you are curious to know how the properties around yours are being valued, go ahead and request for this information to get a better assessment. In this process, you’ll understand how your property is valued against that of your neighbour. This information can guide you in correcting any mistake in your property’s amenities and total evaluation.
Appeal If Your Assessment Is Wrong
If you believe your property assessment is wrong, then let them know it is wrong. Do not be afraid to appeal your assessment if you strongly believe that income properties are paying off an overestimated property tax. You can begin your appeal on a county level and go to the state if necessary. In most scenarios, the assessor will be asked to carry out a new assessment of your property, which you might want to accompany them on. Walking them through it will surely give you a better idea of what is being accessed and anything that should have been duly or well-considered.
Check If You Qualify For Discounts or Tax Relief
Don’t be surprised that with any type of tax policy, there are certain exemptions available for those who qualify. When it comes to property taxes, many states will offer discounts to seniors, veterans, or people with disabilities. Check out your state and local tax laws to determine if your income properties qualify for one of these exemptions. For example, if your property is in Pinellas, Fl. your discounts and exemptions may be different from someone with properties in Hernando. And fortunately, your income properties might qualify for some lower tax bill if they’re being used for agricultural purposes or for a primary residence.
Appeal Your Tax Bill
For those unlucky to receive a new property assessment in time, there is one more method that can be explored to avoid paying overestimated property taxes. This involves appealing your tax bill with the help of an attorney. This method requires you paying some legal fees with no guarantee of success though. However, if your re-assessment is getting delayed and unbearable, appealing might be the way forward. Essentially, you will need to provide the court with pictures, tax information, and necessary information about your income properties. This will be reviewed by a board, who will then determine whether or not to lower the assessment on your income properties. If you strike success, your tax bill will be reduced and adjusted.