Property Tax Appeals

'Shrunk to Fit': Tax Values in a Declining Market

Homeowners across the country are challenging their property tax bills in droves as the value of their homes drop, threatening local governments with another big drain on their budgets

--Jack Healy, "Tax Bill Appeals Take Rising Toll on Governments"; The New York Times (7/4/09).

Which would you rather have, 85% of $100, or 100% of $85?

In fact, they're exactly the same.

Add three (or four) zeroes, and that describes today's property tax environment in much of Minnesota.

Conservative No More

Until recently, most local tax authorities seemed to observe an unspoken rule that, when it came to assessing homes, conservative was better.

So, a house with a fair market value of, say, $250k might only be assessed at $200k. (Of course, another reason for conservative valuations -- at least in a rising market -- is that they're set two years ahead of time).

Today, local governments need every penny they can get. And yet, the housing market is falling, prompting homeowners to challenge their property tax assessments.

What many homeowners are finding out is that their home has "shrunk to fit" the more conservative tax assessed value. In other words, the $250k home that was taxed as though it were $200k now really is $200k. Voila! No tax refund.

Of course, tax assessed value is just one component in determining the tax owed; the other component is the tax percentage, also called the mill rate.

If the mill rate goes up more than your tax assessed value drops -- a distinct possibility these days -- your property taxes rise, not fall.