tax tips

How to lower your property taxes in a market of declining property values

In times of stable and rising housing prices, county assessors may raise a property’s assessed value at the rate of consumer inflation, but not more than 2% each year. Conversely, during times of property value deflation, as we are now experiencing, county assessors are required to lower assessed values to the lesser amount of the property’s current fair market value.

The formula used by the county tax collector to set the tax due from a property owner is based on the assessed value of a property and the tax rate. The assessed value of each parcel of real estate is determined annually by the county assessor as the lesser of:
■the parcel’s base year value on the last change of ownership, adjusted upward annually at the inflation rate limited to 2%; or
■the fair market value on the lien date, January 1st, of each year.

By filing an application for assessment change with the county assessor, a diligent homeowner can lower his property tax when the fair market of his property has dropped below its current assessed value, a condition all too common in California.

To apply for reassessment, the owner submits the “Decline in Value” form (or its equivalent) to the county assessor of the county where his property is located. The application must be accompanied by evidence which establishes the property’s market value is lower than the current assessed value of the property. Appropriate documentation submitted with the application consists of identification and analysis of comparable properties which sold between January 1st and March 31st of the year the application is filed.

On receipt of the application by the county assessor’s office, the county assessor will determine the property’s value as of January 1st. If the market value of the property, as supported by the comparable sales documentation submitted with the application, is lower than the current assessed value on the assessor’s records, then the assessed value of the property will be reduced to its current fair market value.

As a result of the lowered assessed value, taxes for the assessment year following the January 1st lien date will be lower by the same percentage as the reduction in the assessed value, saving precious money for the homeowner.

Copyright © 2011 by first tuesday Realty Publications, Inc.