Property tax is an ad valorem tax on real estate that is computed by a local government and paid by the property owner. Normally, the tax is based on the property value, and this includes land. The local government uses the assessed tax to finance public schools, sewerage and water supply improvements, provide fire services, law enforcement and other services that are considered to be necessary
Explaining property tax
New York Property Tax
The property taxes that are collected are utilized by the government that has jurisdiction in the area where the property is located. The money finances highway and road construction, education, public servants and other community services. Property tax rates and other forms of properties that are taxed differ from one jurisdiction to another. Therefore, it is important to check the applicable tax laws when buying a property.
In nearly all OECD (Organization for Economic Co-operation and Development) countries, taxes on immovable property constitutes a low proportion of federal revenue in comparison with value-added and income taxes. But the rate in the US is significantly higher than in a lot of European countries. Various pundits and empiricists have advocated for the raising of property rates in developed countries. They assert that the certainty and market-rectifying nature of the tax promotes proper development and stability of real estate.
Property tax calculation
Whats is Property Tax?
Property taxes are calculated by multiplying the property tax rate by the latest market value of the properties under consideration. The majority of tax bodies will recalculate the tax rate every year. Most property taxes are charged on real property whose legal definition is given by the state bureaucracy. Real property encompasses the land, fixed buildings and other structures. Personal assets (for example TVs and clothes) are not charged property taxes.
Eventually, property owners are bound by the rates set by the municipal authorities. A municipality will engage a tax assessor who assesses the property in the locality. In a number of areas, the tax assessor might be elected. The assessor will charge property taxes based on current market values. This value is taken to be the home’s assessed value.
The property tax payment schedule differs from one locality to another. In the majority of local property tax codes, there are structures that enable a property owner to talk about their tax rate with their assessor. If property taxes remain unpaid, the taxing authority can place a lien on the property. Before purchasing a property, buyers must always conduct a comprehensive review of the outstanding liens.
This is not true. Assessors only establish a property’s market value. After the assessment is done, the market value is multiplied by the rate of tax in order to arrive at the actual property tax figure indicated on the tax bill. Normally, property tax rates are determined by the local authorities, for example school boards, county legislatures and so on.
Assessments lead to high taxes
While this might be true, assessments are only half the story. Although getting a high assessment might play a part in a homeowner receiving a high property tax bill, the tax rate is the main determinant of the amount of tax that an individual will pay. You may have a low property tax assessment, but your tax bill will still be high if the assessment is based on a high property tax rate.
Your property assessment is the only component of your property tax bill that you can do anything about- other than complaining to the local authority in your area about the tax rate or voting against tax rate hikes. Because an assessment can be subjective to some extent, the majority of localities have established assessment appeal procedures if you feel your property assessment is excessively high or it does not reflect the market value.
Contact your local assessor’s office to learn how you can file an appeal yourself or contact a professional property tax reduction service to handle the process on your behalf. Most tax grievance companies charge 50% of your first year’s savings with nothing due upfront and nothing at all if they are unsuccessful. The firm will handle the entire process including the extensive legal filings and court appearances. But beware, never hire a tax grievance company that charges you anything upfront, since savings are never a guarantee.
People are charged high property taxes to plug state budget deficits or states get too much money from collecting property taxes
Property taxes are the leading source of revenue for school districts and local authorities-but not the states. The Tax Policy Center notes that taxes collected from property taxes contribute just 2 percent to the states’ total tax revenues. Moreover, a lot of states do not get any tax revenue from property taxes. Instead, they leave all the property tax revenue to school districts and localities.
But states without income tax or sales tax (or both of them) usually have a higher dependence on property taxes. Michigan, Wyoming, Arkansas New Hampshire, Montana, Michigan, Vermont and Washington receive a little over 8 percent of their total tax revenue from the property taxes they collect. States such as New Hampshire, Michigan and Vermont have introduced special property tax levies to boost public school funding.
(Information Source- Tax Policy Center)
Equalization rates can rectify inequitable property assessments
By definition, an equalization rate is the ratio of the total value of properties assessed in a particular community to the true market value of the properties.
Equalization ratios are municipal-based measurements and they are intended to make sure that the assessments done in the whole municipality do not vary too much from the market value. In addition, the ratios may also be used to ensure property taxes, for example the public library levies that various communities pay, are shared according to the total market value for every community. This is achieved by setting a specific assessment to market value ratio for the municipalities.
This is a false myth. Equalization rates are not intended to rectify individual assessment
Tax rates are good pointers of tax increases
This is not true. A property tax bill is based on two factors: the tax rate and the assessment of the value of the property. The tax rate might rise but if the property values are declining, your property tax bill will remain unchanged. Similarly, tax rates may decrease, but if property values rise substantially, your tax bill may increase. The property tax that you will pay is dependent on these two factors.
Assessment caps reduce the assessment on property tax
Assessment caps ensure that assessments do not rise beyond a set limit every year. Having the cap means that properties whose value is appreciating faster than the rest may end up being under-assessed. This is due to the fact that the cap prevents the homes from being assessed at their actual value.
For instance, let’s assume there are customized homes in a fashionable neighborhood whose values are appreciating quicker than other homes in less attractive areas of a town. The values of fashionable homes are rising at the rate of 25% annually while values of the other (older) homes are increasing at a rate of 10 percent annually. In addition, let us say there is an assessment increase cap of 15% per year.
The cap will stop the fashionable homes from being assessed at the rightful market value but the older homes will be assessed using their real market value. The owners of the older homes will be left in the lurch because the owners of the fashionable properties are not paying their equitable share. Obviously, this is not necessarily the case, but it is a potential problem with having assessment caps.
Common terms used in the property tax field
There is plenty of jargon that is associated with property taxes, and sorting through this maze can make you dizzy. Therefore, we have provided the simplified definition of several common property tax terms:
Abatement- Partial or full writing off of a debt
Ad Valorem Tax- A value-based tax, for example property tax
Arrears- A term that describes taxes for the previous year that are still outstanding (or are paid) in the current tear
Assessment(Appraisal)- The process of establishing the value of a for property tax reasons.
Circuit Breaker- A relief on property tax that lowers or limits the property tax bill for specified persons.
Comparable sales method- A way of estimating a property’s market value by comparing the sales of equivalent properties.
Equalization rate- The ratio of overall assessed property values in a particular community to the actual market values of the properties.
Homestead deduction(exemption)- A reduction on assessment enjoyed by property owners who use the property as their main residence.
Millage rate- An alternative term for the tax rate, usually given as a thousandth of a dollar (called one mill)
Tangible personal property- Property, besides real estate, that can be touched or felt such as office furniture or a car. A number of cities and states tax tangible personal property.
The Carry Forward policy in Nassau County allows property owners to enjoy annual tax reductions continuously.
Nassau’s Assessment Review Commission gives settlement offers to people who appeal against the tax assessment on their houses. Those who repeat the appeal every year get reductions that are automatically carried forward in the group of people who negotiate for reductions each year.
However the gravy train is halted in case the property is to be sold or the owner makes an application for a permit when building or when, in addition to other issues, the property owner misses an appeal.
While the group getting reductions continue moving ahead, the homeowner together with the annual automatic reduction remains behind.
A Sunday report in the Newsday newspaper reviewed Nassau’s Carry Forward policy and declared that it was as discriminatory as the whole assessment system in the county.
In the first place, the normal property owner who got a settlement during the initial year of the assessment system reforms carried out by Edward Mangano (Republican County Executive) in 2010 and then filed successive annual appeals up to 2015 eventually saved 20% of the taxes they could have been required to pay during that period.
In case the homeowner dropped from the Carry Forward group at least one time during that time, the tax reduction came to 17 %.
On the other hand, homeowners who postponed filing their annual appeals after the year 2010 did not enjoy the full benefits that came with the automatic reductions.
But let us assume that all homeowners accepted settlements from the commission from 2010 and that in addition, they wished to make sure that they did not drop from the Carry Forward group.
Was it possible to do that?
According to the report on Newsday, the answer to this question is no because the commission did not publicize the basis for remaining in the group and, equally important, the acts that could lead to the disqualification of a home from the tax assessment policy.
It was therefore not possible for the owner of a house to be aware that simple actions such as selling or listing a property, applying to get a permit when building or missing an assessment appeal would ultimately affect potential reductions.
That is unjust and unfair.
From the time that the assessment overhaul launched by Mangano got underway in 2010, taxes amounting to $1.7 billion have been moved from homeowners who contested their assessment to those individuals who did not. The end result of this has been the creation of two separate and unequal tax systems.
Next January, Laura Curran, a Democrat, will be the new county executive and she will need to craft a solution to the problem. Throughout the campaign, Curran frequently stated she would engage a properly-qualified assessor to take the place of the acting assessor appointed by Mangano.
Long Island’s school spending may increase to an average of 2.35% for the 2017 – 2018 school years, with school increasing by up to 1.73% more compared to the 2017’s current hikes, yet only within state tax-cap restrictions for the large majority of districts.
According to the state Education Department, specifically from the figures, they released last Wednesday, it seems that budgeted spending may increase by about 2.36% in Nassau County and by about 2.33% in Suffolk County.
In Nassau, tax levies are said to increase by 1.37% & by 2.10% in Suffolk. Every year the Education Department colts report from approximately seven hundred districts across the state, including one hundred and twenty-one in the 2-county region.
At this point school budgets are proposals and they’ll be submitted to voters on May 16th. Currently, there’s only a single school district in New Suffolk that announced its intention of overriding the state-imposed tax cap. By law, this means that 60% of the votes need to be in favor of the new budget.
The New Suffolk spending plan will increase its tax levy by six point five percent in 2018, which is almost double the current three-point four percent limit. Proposing such an increase though is not that simple and school officials are still thinking about it. However, in part they do agree to it given the fact there’s been an unforeseen increase in tuition costs.
The district operates just 1 elementary school. When it comes to its older students from grades 7 through twelve, they’re sent on a tuition basis nearby Southold. This year though it seems that 4 new high school age students moved into the county, which is a very large increase for a system of approximately twenty-five students.
On top of that, the county received 2 new students (elementary age) who don’t speak too much English. As such, it’s the district’s duty to pay for language instruction classes so that the new students can learn how to speak proper English. The good news is that there are also plenty of certified teachers who can work with such students and help them integrate better.
For a full year, the total costs amount to about $20,000. When you think about it, this is a very large hit, said the president of the new Suffolk school board, Tony Dill.
In an effort to reduce costs as much as possible, 2 local teachers are currently being certified so they can work with students that do not speak English.
1 district in Suffolk and 5 districts in Nassau are cutting taxes. This includes Valley Stream thirty which currently has the highest project levy minimization: 15.7 % (onetime cut).
According to local school leaders, the cuts will fulfill their promise to make payments made by property owners in lieu of PILOTs (taxes payments) in order to lower the levy for this year and the next. It’s important to mention that their promise only covers the taxes payments that exceeded budgeted removes in 2017.
The administrators of Valley Stream said they wish local homeowners will get some property tax relief thanks to the levy’s decrease, yet they’re not really sure about whether this will be the case due to the various complexities (not under their control) of Nassau’s tax system.
One example of such complexities lies in the fact that there are 4 classes of taxable property in Nassau. Also, the burden associated with each class, regardless of if we’re talking about residential or commercial properties, changes on a yearly basis. Another problem is the fact that the largest PILOT payments are currently made by the Green Acres and they’re presently under fire due to legal disputes.
Because of these issues, the school officials said that they are not sure whether the state will receive the same payments as it did in the past. Furthermore, if there are any solutions to the problem, they’re going to be up to different government entities, such as the Industrial Development Agency, Hempstead Town, and the county.
“Currently, there are many questions asked, but very few answers, said Valley Stream school districts superintendent”, Mr. Nicholas Stirling.
Nassau County Executive Edward Mangano received a warning Last July that in 2017 the popular tax cut which averaged one hundred and sixty-six dollars would no longer be applied.
Even though he was warned about it, Mangano failed to inform about 44 thousand senior citizens who did get the abatement concerning the end of the tax break program. They were completely taken by surprise when they got their general tax bills last month.
The county’s comptroller, including the lawmakers, says that they weren’t informed about the expiration of the abatement.
After many complaints were filed, the state and county lawmakers struggled to extend the abatement by introducing legislation that was enacted back in ’02 to offset a nineteen point three percent increase in county property tax. Homeowners who are at least sixty five years old and make less than eighty-six thousand dollars per annum would qualify for the tax break, which exclusively applied to county taxes.
In an E-mail copy obtained by Newsday, Roseann Dalleva, who is a Budget Director and Lisa LoCurto, who is the Chief Deputy County Attorney for Mangano, stated that they received notification about the abatement’s expiration on July twenty-first, 2016. The E-mail requested guidance for the preparation of the ’17 budget. The E-mail was confirmed by 2 other county sources and said that it came from the assessment department.
On January 19th, a Freedom of Information request was submitted by Newsday, asking for all the E-mails Dalleva and LoCurto exchanged between May and July regarding the abatement. The E-mails were not provided by the Mangano administration, but they did say last week that a reply will be provided to Newsday in approximately thirty days.
One of Mangano’s spokesmen, who are actually involved in a corruption case, said that the County Executive never received information about the expiration of the abatement. He continued to say that the E-mail date referenced is after the completion of the State Legislature’s session last year and it’s too late to impact the situation in 2016. The most important piece of news for the residents though is that the State is addressing the situation.
On Friday, the Democratic Nassau legislator, Laura Curran who is also running for county executive, said that taxpayers are extremely unhappy about county execs who cannot properly run the county. Seniors needed to be informed about this.
The spokeswoman for Presiding Officer Norma Gonsalves, Cristina Brennan, said that the Republican staff and legislators weren’t informed about the expiration of the abatement as well.
Another runner-up for county executive, Comptroller George Maragos, said on Friday that this was all done in secret without notifying the seniors in any way. He continued to say that the whole thing is even more disturbing since the county exec was also not notified about it.
Assemb. Charles Lavine, who plans on running for county exec, said he is truly disappointed of the whole situation and said that the Mangano administration should have at least been forthcoming about this and inform its citizens about the change.
Mangano keeps mum about whether he’ll run again this year
On January the 23rd at the most recent Mangano administration meeting, Curran questioned it when lawmakers voted to request that the state puts an extension on the tax break. Even so, she received no answers.
Was the administration aware at any point during the budgeting process that the abatement will expire? Curran asked.
Former Legis. Fran Becker and Mangano liaison said that the county exec agrees with the abatement’s extension, yet no one was sent yet to talk about this.
This caused Curran to ask whether anyone in the administration knew about this during the budget process. Becker swiftly replied that no one knew about it.
Curran continued to say that since people will vote on this, it’s necessary that we have a good answer. Becker’s reply was to ask Curran to repeat the question.
Anyone who wishes to appeal their property bill needs to first of all carefully read their real estate assessment. You can actually reduce your property tax bill and the best way to do that is to appeal the value that your home was assigned by the taxman. It’s this value that’s used for calculating the amount of tax you owe.
If you want to reduce your property tax, then you first of all need to show that your home’s value is lower than the value assessed by the taxman. To do the initial research, you can call your real estate agent or do some quick online research. If you do indeed find out that your property’s value was assessed to be higher than it actually is, then the appeal process can take months.
Read the Assessment Letter
The real estate tax is regularly assessed by the local government. When you receive the letter about it in the mail, it will contain info about your property, such as its assessed value (including that of your land), legal description, but also lot size.
To calculate your property tax bill, you need to multiply your local tax rate with your property’s assessed value.
If you discover that the value of your home is higher than it should be, be sure to challenge it right away. The process should take thirty days or less.
To challenge your assessment, be sure to consider the following steps:
1.Think about Whether an Appeal Is Something You Want To Go Forward With
The stakes are what determine the amount of effort you want to put into a challenge.
If you can lower your property’s assessed value by fifteen percent then your tax bill should go down approximately 15% as well.
In Suffolk County NY, the tax rates are about four percent of a property’s assessed value, in Nassau County rates are about eleven percent meaning that the savings potential is higher. The same goes for communities where property prices are above the median.
2. Verify the Data
Check the data for your home and make sure it’s correct. This includes the size of the lot, number of fireplaces, bathrooms, etc. If you find anything wrong, challenge it right away.
3. Get the Comps
Speak to a realtor to learn more about 3 to 5 properties that were recently sold. You may also want to head over to realtor.com to check the value of similar properties to yours in terms of location, condition, style, and size. If you want, you can spend anywhere between three hundred and fifty to six hundred dollars to hire an appraiser and receive a professional opinion about your property’s value.
Once you find comps, verify their assessments. If your local government has no data on them, hire a real estate agent to help you learn more about this. If you discover that the assessments on your comp are lower, you can then argue that yours is higher than it should be.
You can have a case for relief based on equity if you can prove that the comparable properties are better than yours. For instance, it could be that while you were trying to clean up water damage, your neighbor added an addition to their home. In this case, the properties aren’t comparable anymore.
4. Present your Case
Ring your local assessor’s office and see what they have to say about your case. If you’re not happy with their answer, you may request a formal review. Fill out any necessary forms and pay attention to procedures and deadlines. A review may take between 30 and 90 days and usually does not require you to appear in person. Once a decision is taken, you’ll receive it in writing.
5.If You Don’t Like the Review, Be Sure To Appeal It
The decision can be appealed to NYS Supreme Court, Small Claims Assessment Review Division, SCAR for short, and you don’t have to actually hire a tax grievance company to do so. A filing fee may have to be paid (Thirty dollars). Keep in mind that this process may take up to one and a half years. Luckily, homeowners win (more than 50% of the tax appeals in Nassau and Suffolk Counties).
While weighing the appeal, consider the following:
Only your real estate assessment can be reduced and not the rate you’re taxed at.
Under NYS law your assessment can not be raised.
The sale price (if you plan on selling your home) may be negatively impacted if your assessment is reduced before putting your home up for sale.
If you want to save money, then you should learn more about whether you qualify for property tax exemptions based on factors such as military service, disability, age, etc. Your local assessor can handle these type of requests as well.