Homeownership can be complicated, but we also think it’s one of the most rewarding ventures out there. In our series, Ask an Edina Realty Lawyer, we are hoping to demystify some of the trickier aspects of buying, selling and owning a home.
In this edition, one of our lawyers discusses taxes that are assessed against real property, how those taxes are calculated, and how it may be possible to get them reduced.
Please note: Property taxes vary from state to state and while the information in this article provides some good insight for many states, it is primarily focused on Minnesota and Wisconsin.
Dear Edina Realty Legal,
I recently received my property tax estimate. Is there anything I can do to reduce the amount?
When we think about taxes, we often feel like they are something completely outside of our control. In many circumstances, that’s true. The government determines what we will pay and we simply pay it.
But when we’re talking about property taxes, we might be able to exercise some level of control, at least to ensure that we are not paying more than our fair share. Let’s dive in.
How are property taxes calculated?
Property taxes are calculated based on three principal factors:
- The location of your property: Your tax amount is affected by the city and county in which the property is located. The more the local government spends, the more your taxes are likely to rise. For example, a homeowner in Minneapolis may pay more in taxes than someone who owns a similar home in, let’s say, Buffalo, MN.
- The classification of your property: The government has different tax rates for different types of properties. Commercial properties and apartment buildings tend to have a higher tax rate than a residential homestead.
- The value of your property: Each year, your local government estimates the market value of your property. Market value is the price the property would likely sell for if it were offered for sale on the open market. Although the actual tax calculation is rather complicated, we can all understand the concept that the lower the market value of your home, the lower your taxes will likely be.
How can I try to lower my tax bill?
To be honest, you can’t do much about your local tax rates. And your tax classification is usually correct as a residential homestead. But one thing you can address is making sure the government is not inflating the market value of your property.
Property values and classifications are determined annually by the local assessor. It would be impossible for the assessor to make an annual individualized valuation of each property, so the assessors often rely on public records about the property itself, as well as market values in general.
As a result, it is quite possible that the assessor’s estimated market value differs from the real market value of your property.
If you believe that the estimated market value is too high — maybe you’ve had a recent appraisal or you’ve been watching the sale prices of similar homes in the neighborhood — you can try to get that number lowered. Here are some ways to go about that:
1. Talk to your assessor
One of the easiest steps you can take is to contact the assessor responsible for determining your home’s value. In Minnesota, this is the county assessor, while in Wisconsin, it’s a city assessor.
You can make sure that the assessor has all of the correct information about your property — if they think your house has four bedrooms when it really only has three, that’s going to result in an incorrect value. The assessor may want to take a look at your home to confirm information about the property.
In addition, if you have recent comparable sales prices of local homes, you may be able to convince the assessor that he or she has overstated the value. And that short phone call or meeting could result in a reduction in your tax bill.
2. Appeal to the local board
If you are not able to reach an agreement with the assessor and you still believe that your property is overvalued, you may appeal your tax assessment to a local group that is tasked with ensuring that properties are properly assessed.
This group is at the municipal level and is called:
- The Local Board of Appeal and Equalization (Minnesota)
- The Board of Review (in Wisconsin)
The boards meet annually in the months of April and May to review tax assessment appeals.
Now keep in mind, the law presumes that the assessor’s determination of value is correct. So, if you want to be successful, you’ll need to have evidence that the assessor is wrong. That may consist of a recent appraisal of the property, photos or other documentation of the condition of the property, and evidence of sales of other properties.
To appeal based on comparable sales, you’ll need solid backing evidence. The most persuasive comparable sales are ones that:
- Involve properties very similar to yours
- Were recently sold
- Involve properties geographically close to yours
3. Appeal to the court system
You can also appeal your tax assessment to the court system.
In Minnesota, you may appeal to the tax court instead of, or in addition to, an appeal to the local board. Tax court appeals must be filed by April 30 in the year the tax is payable.
In Wisconsin, you can only seek court review if you have filed an appeal with the Board of Review. A court appeal must be filed within 90 days of receiving the board’s determination. Alternatively, you can seek review of the board’s decision by filing an appeal with the Wisconsin Department of Revenue.
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Seeking review of your tax assessment may seem daunting. But if you believe the assessor is overvaluing your property, a phone call, meeting or appearance before a local board could result in some significant savings.
The Edina Realty Legal Department serves as in-house counsel for Edina Realty and does not represent private clients. This Insight is not intended to provide legal advice.