Homeowners across the country are getting a shock when they open their 2022 property tax appraisal notices. These appraisals are often far higher than they were only a year ago. What will these higher appraisals mean for property taxes in the future? What can you do if you think your appraisal is too high?
Lull before the storm
Even during the pandemic, home sales across the nation stayed strong. The limited inventory of homes for sale was overwhelmed by a crowded market of buyers, bidding prices skyward.
Appraisal districts lagged behind this rising curve. Appraisal districts use comparable sold prices over the previous six to twelve months to determine values. In locales where appraisal districts conducted annual valuations early in 2021, that year’s property tax appraisals didn’t reflect much of 2021’s rapid run-up of home prices. Those value increases are now being reflected in 2022 property tax appraisals.
The Federal Reserve has raised interest rates three times through June 2022, and home sales are slowing. This may bring prices back down to earth, which would cause appraisals in 2023 to level off or even decline slightly. County and state government operating costs do not decrease, however, so these entities may raise tax rates if valuations are down.
Tax caps
Just because your property appraisal spikes by 50 percent does not mean your taxes owed will rise that much. Almost every state has a property tax cap that sets a maximum percentage that taxes can increase in a year on an owner’s homestead. (These caps usually do not apply to investment properties.) Every state has its own laws, but maximum increases of between 3 and 10 percent are standard across the country.
States also have caps designed to protect certain groups, such as people over 65 and veterans.
Protest a property tax appraisal
You as a taxpayer have the right to protest your property tax appraisal. Unless you believe the assessment is reasonable or even undervalues what you think your property is worth, you should take advantage of this right. The appraisal notice you receive will contain a form explaining how to file a protest.
You cannot base your protest on vague claims of an unfair increase. Instead, back your claim that the appraisal is too high with documentation of comparable sold prices for your area.
You can hire a professional protest firm to challenge your property tax appraisal for you. Usually, you pay these firms a percentage of the amount you save in taxes. If the firm fails to cut your tax bill, you pay nothing.
Related – Understanding Your Property Taxes