Lower Your Property Tax Bill – For many people, the start of a new year signals a time to make some kind of change in their life and become more like their ideal selves. For others, January signals the time to make a different change, one that’s easier to make: slashing their property tax bill. The tax appeal process in New Jersey involves a number of steps and using an experienced property tax attorney to guide you through the process will make New Year’s resolutions easier to keep.
Since tax appeal season in New Jersey is approaching the start of the year, lowering your property taxes is the perfect New Year’s resolution. By the end of January each year, every New Jersey property owner is supposed to receive their annual appraisal. That’s the little green card that came from the tax assessor’s office. Because all properties within a given municipality in New Jersey are taxed at the same rate, it is judgment that distinguishes one property owner’s tax bill from another and is a real measure of whether or not the property is fairly taxed. The period during which a person can generally appeal an assessment in New Jersey is from the time the assessment is received until April 1 (May 1 if there is a reassessment or revaluation).
The first step to understanding whether you are being taxed too much is to understand how your property is valued.
In New Jersey, your valuation is the value at which your property was valued at the last revaluation. Although the number of municipalities that rate your property changes from year to year, your rating usually remains the same. Each year, each municipality in New Jersey is assigned an “equalization ratio,” which is intended to reflect the current property value in that particular municipality in relation to its value in the year of valuation.
You can find your municipality’s equalization allowance by contacting your city’s tax assessor or local tax council. It can also be found on the New Jersey Division of Taxation website. The “average ratio” is the percentage of “true score” that counts as your rating. In other words, divide your valuation by the equalization ratio to get a true valuation of your property. This is the number your appraiser actually uses to calculate your property taxes, not your appraisal.
For many people, the decision about whether they should appeal their valuation is an easy one once they become aware of the true valuation of their property. For others, especially people who have owned the property for a long time and have not thought about buying or selling, the question of whether to appeal an appraisal is less clear.
Here are some rules of thumb to consider in deciding whether to appeal your judgment:
- As your valuation gets older and your equity ratio gets lower, it’s more likely that your valuation doesn’t match the true value of your property.
- Conversely, when the equity ratio rises above 100% as property values have fallen (as has happened in recent years), it means that on average, properties are overvalued in the municipality. Property owners still bear the burden of proving that their property is overvalued but an average ratio of more than 100% is an indicator of overvaluation.
- When you live in a development area or neighborhood where properties are very similar, and prices have dropped significantly, the value of your individual properties may decline and your valuation and equity ratios may not align.
- Whenever a property has unique characteristics that make it very different from the surrounding properties, there are often cases to be made to reduce the valuation. For example, a very large old house in a smaller neighborhood, a new home will often be rated as a larger house with the characteristics of the surrounding area. In fact, such homes tend to be more difficult to sell and often require a lower valuation.
The next step in the process for individuals is to decide whether they want to work with an attorney in this process. While corporations and other legal entities must be represented by an attorney under New Jersey law, individual homeowners can represent themselves. Nevertheless, there are very good reasons to consider keeping it:
- Many attorneys work on a contingency basis so there are no legal fees unless your taxes are deducted. There are certain fixed expenses that property owners pay but attorneys receive a percentage of the tax savings if, and only if, the appeal is successful.
- An attorney working on a contingency basis must provide a free consultation and conduct his or her own independent research to determine whether an appeal is likely to be successful. If an attorney doesn’t answer the phone and take the time to tell you why they believe your judgment should be reduced, that’s a signal to look elsewhere.
- Most importantly, there is the convenience of having an experienced professional handle your case. You don’t have to worry about any rules that can be burdensome and, frankly, arbitrary. (For example, a property tax appeal may be rejected if the petition is not printed on official paper). You don’t have to testify at trial, which is usually foreign and inconvenient for homeowners.
- Many people believe you will get better results when you are represented by an attorney. These extra savings over the years more than offset attorney fees.
Take the case of Stephen and Rachel Pineles, who decided to appeal an appraisal of their home in Essex County New Jersey in 2010. “My city hasn’t had a revaluation in over twenty years and my valuation is very high compared to its true value. my house,” said Stephen Pineles. “Hiring an attorney to handle property tax appeals was definitely the right decision for me. I didn’t have to worry about anything. Initially, the tax assessor offered a low deduction. In the end, my attorney negotiated a much better settlement and my property taxes were reduced. over $3700 or nearly 30% of my tax bill.”
As with anything, there are a number of risks involved in appealing your judgment. In New Jersey, if your case is unsuccessful, you will not recover the costs yourself. In addition, under New Jersey law, your appraiser has the right to state that your rating is too low. However, this right is limited to cases where your property is undervalued by 15%. If the valuation of your property divided by the equity ratio is $100,000, the appraiser can only argue that the valuation should be increased if he or she can prove that your property really is worth at least $115,000. If your attorney has done his research properly and has determined that there is a good case for lowering your judgment, that is unlikely to happen.
As the new year begins, in addition to some of the more difficult goals and changes people think of, it might be worth considering trying to lower your tax bill. This can be one of the easiest and most profitable resolutions you make.