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Property Tax Valuation

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Marching through the weeks of the New Year, we step into March. This is the time when winter gradually makes way for spring and while enjoying the beauty of the budding flowers in their garden, Steve and Debra are aware that there is another task awaiting their attention.

Usually each year in March, property owners start receiving annual Property Tax Valuation Notices. These are notices from the County Assessor that inform real property owners how much property tax is owed for each house or piece of real estate. This will be based on the assessed value of the property from last year. Typically, Property Tax Valuations are 18 months behind the current property values.

While the couple know the property valuation notices may reflect some DIFFERENCE from the current value of their real estate, they still need to consider whether they want to appeal the Property Tax Valuation they receive. Sometimes the valuation notice will be lower than your property’s current value and sometimes it may be higher. Remember, appealing your valuation notice could either increase or decrease what taxes you owe on your real estate. Steve and Debra know that they must understand all these factors before considering their next options.

To fully comprehend your property taxes, there are some points to understand. The Full Cash Value (FCV) should reflect current market value. Your Limited Property Value (LPV) is the figure that will likely change on your new Valuation Notice. This number is what is used to assess taxes for school districts, cities, community colleges, and counties. It’s important to appeal sooner, rather than later.

Each owner has 60 days from the notice date to appeal the property valuation either online or by mail. If you don’t think you can sell your property for the Full Cash Value listed, consider appealing. If there is something wrong with the information the County Assessor used to value your home, such as square footage, consider appealing. If you believe bad comparisons or sales of comparable homes (“comps”) have been used to assess the value of your home, consider appealing.

Additionally, each piece of real estate is divided into a specific property class such as residential, commercial, raw land, and rental classifications. Each classification determines the rate at which the property will be assessed. For instance, residential property might get (.1) tax rate assessment while a rental property might get a (.3) tax rate assessment, etc.

Often property owners do not let the assessor know when they are renting real estate to others and this can cause real problems with property assessments, since you can only have ONE primary residence at a time, regardless of how many pieces of real estate you own. Frequently County Assessors will send letters to owners of multiple real estate properties asking for clarification of ownership. Not being honest with such inquiries can cause both legal and financial problems for real property owners. 

Here are some points to remember:

  • Property Tax Assessments come out in March.
  • Property Tax Valuations are usually 18 months behind the actual market valuations.
  • Property assessments and tax rates are based upon different property classification (rental, commercial, raw land, primary residence, etc.).
  • County Assessors are now sending letters asking owners of multiple properties, which one is the primary residence (only one is allowed at a time).
  • Appealing your valuation may increase or decrease the taxes you owe.
  • Consider appealing your assessment if:
    • Full Cash Value (market value) is wrong.
    • Your property square footage is wrong.
    • Sales of comparable homes are wrong for your neighborhood.
  • Remember, when appealing, you are arguing that the assessment is wrong, not arguing that the value of the property is wrong. If you argue the property value is wrong, your appeal will be denied. Be sure to argue one or more of the three (3) consider appealing bullets above.

 

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Mr. Hockensmith has been a guest newscaster for national and local TV stations in Phoenix since 1995, broadcasting financial and tax topics to the general pubic. He has written tax and accounting articles for both national and local newspapers and professional journals. He has been a public speaker nationally and locally on tax, accounting, financial planning and economics since 1992. He was a Disaster Reservist at the Federal Emergency Management Agency, for many years after his military service. He served as a Colonel with the US Army, retiring from military service after 36 years in 2008. Early in his accounting career, he was a Accountant and Consultant with Arthur Andersen CPA’s and Ernst & Young CPA’s.

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