Most people eventually want to own a home especially since real estate is a highly effective way of ensuring you are able to pass along intergenerational wealth to heirs. But you will need to be aware of the various costs that come with homeownership. One of the most significant and commonly encountered expenses is property tax. Luckily, there are several things you can do to be proactive in minimizing your property tax bill.
Look at your property’s tax profile
One of the first things you may want to do is visit the relevant local governmental agency and take a look at the tax profile on record for your property. Double-check to see if the details regarding your property are correct for the record. It is possible that wrong information, such as inaccurate lot size, on the record can result in a higher than necessary property tax bill.
Think twice about structural alterations
You may not want to follow through on some structural changes you have in mind for your home. These improvements may cause you to have larger property tax liabilities. Therefore, carefully consider if these improvements will be worth the extra costs.
Do not make cosmetic improvements
It is important to understand that assessing your property’s value can be quite subjective in nature. Therefore, you may not want to make any cosmetic improvements until after the property assessor has taken a look at your real estate. Cosmetic improvement can make your home look good, but it can also result in the assessor overvaluing your home which means higher property tax costs.
Research neighboring properties
How your property value is assessed should be close to how similar properties within the same neighborhood are assessed. However, if a neighboring property which has most of the same relevant characteristics as your home is valued significantly lower, it is possible the assessor made an error. Potentially your home may have been overvalued which means you would be paying higher than necessary property taxes.
Tour along with the assessor
It is a good idea to accompany the assessor as he or she is inspecting your home. This allows you to bring the assessor’s attention to any defects which may not be easily noticeable. If you do not do this, it is possible the assessor may not consider these deficiencies in your property which will mean a higher valuation for your property. Of course, this is not what you want since this means your property tax liabilities will increase.
Provide assessor access to your property
Technically, you do not have to allow the assessor access to your home’s interior. However, it is generally best if you do provide the assessor access. It is common for an assessor who is not allowed to inspect the inside of the home to assume that there have been improvements made to the interior, resulting in valuing the property higher than it should be.
Create a complete tax plan
Although property tax is a significant expense which you should try to mitigate, there are many other types of taxes you will have to deal with when creating a family financial planning strategy. Make sure to keep the big picture in mind and fit your property tax mitigation strategy in with your broader financial plan.