Reader question: My real estate taxes went up over 100% this year. Is it legal to raise taxes so high in one year?
Monty's answer: For real estate taxes to double in one year would be extremely rare. One has to wonder if any community in the United States has ever experienced such a tax increase. However, it would not be that unusual for a taxpayer to see their assessment double in one year, but even that may be rare. Each parcel of land has an assessed value. Improvements are also assigned a value. The combination of the land value and improvement value equates to a total property assessment.
Check the notice
What likely happened is that your assessment went up 100% and your actual tax bill will be about the same. The tax bill may go up, or down. There is a method municipalities utilize to calculate the tax levy called a "mill rate." The taxing authority will establish the annual budget to operate the city and when the amount of money necessary to fund the budget is known, calculate the mill rate. Substantial adjustments in the valuation occur when there is a general reassessment, and almost every property will see an increase in assessed valuation.
Without a general reassessment, there are reasons that a property may see a change in the assessed value. A change in use, a rezoning that increases the value, an addition to the improvement on the land or some other change can affect your tax bill.
When you receive your notice of the change in the assessment, it often will provide the rationale for the increase. If you do not understand the reasoning, you can contact the assessor. If you know the argument but believe the logic is incorrect, the law provides a platform for you to challenge the increase (no one ever challenges a decrease). The platform is called the Board of Review.
The Board of Review can vary in size, but typically there are three to five members. The members can be municipal officials, such as the assessor or can also include community members with knowledge about real estate. If you decide to appear at the Board of Review, you need to be prepared to defend your position. The Board of Review is there to make sure the assessor did not err and you must be able to demonstrate that the assessor did make an error. The board denies many taxpayers because they show up unprepared.
There are firms or real estate appraisers that will research your new assessment and will appear at the Board of Review on your behalf. These firms typically will charge a success-only fee. Expensive homes, apartment buildings, large tracts of land or large retail structures are the consultants' likely customers. Errors are more likely to occur here and generate enough tax savings to compensate the consultant. Here is a link on how to appeal if you want to go it alone.
Richard Montgomery is the author of "House Money - An Insider’s Secrets to Saving Thousands When You Buy or Sell a Home." He is a real estate industry veteran who advocates industry reform and offers readers unbiased real estate advice. Find him at DearMonty.com.