Every week, Mansion Global poses a tax question to real estate tax attorneys. Here is this week’s question.
Q: I live in New Jersey and have outrageous property taxes. What can I do to reduce them?
A: New Jersey has the highest property taxes in the U.S., and the bill is often the second highest expense for homeowners, after their mortgage.
Short of moving to a smaller home or another state, appealing the assessment of a property is how homeowners can lower their tax bills, said Anthony DellaPelle, a partner at McKirdy, Riskin, Olson & DellaPelle in Morristown, New Jersey.
"It’s important to do a checkup every year," he said. "It can save thousands of dollars."
The first thing to do, he said, is look at the assessed value of the home, which homeowners should receive in the late summer. Next, apply the equalization ratio, which differs in each municipality.
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The true value of the home is the assessed value of the home divided by the equalization ratio, which are determined by each municipality and available online, according to Douglas Standriff, an attorney based in Maywood, New Jersey. In some places the ratio is as much as 100%, while in others it can be as low as 12% or 16%.
If the property were accurately assessed, then the assessed value and the true value would be the same. If the true value is less than the assessed value, then the property is over-assessed.
After figuring out what the town thinks the property is worth, homeowners can do some digging to find out if that’s comparable to others that are similar in age, size and condition, the lawyers said.
Contacting a real estate agent can be helpful when finding these "comps," although a property records search will be able to give people a general idea. Some real estate websites collect that data as well, making the research go more quickly.
Look at sales from late summer and early fall, Mr. DellaPelle said, which correspond to the assessment date of the property. Then compare those prices to the assessed value of the property in question.
"What did they sell for? If it’s less, you may be over assessed," he said.
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If that’s the case, homeowners should make a claim to their local tax board. The deadline to make an appeal is generally April 1, although that varies in some areas. Hearings are generally set for summer, and decisions are sent out around Sept. 1. If a homeowner doesn’t agree with the outcome, the results can be appealed to the tax court.
At the hearing, the comps that were used to determine a viable claim will also be used as evidence.
People do go to the hearing with just the comps in hand, but Mr. Standriff recommended bringing in an appraiser, and making sure he or she is there to testify. That’s especially true for unique and high-value homes where the number of comparable properties may be limited.
An appraiser "will be able to give finer detail and more data as to how he came to that opinion of value," explained Mr. Standriff. He or she can comment on specific points of the property that affect its value.
One more thing to keep in mind: Homeowners are required to pay the assessed taxes even if they are appealing the rate, Mr. DellaPelle said. If the homeowner ends up winning the appeal, a refund or a credit will be issued, but if the taxes are unpaid, the case could be dismissed without further consideration.
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