- It reduces the property tax portion of your mortgage payment, or if you don’t have a mortgage, it reduces your yearly property tax expense.
- It allows your “house hack” to go further because you have less housing expense to cover.
- It speeds up your journey to financial independence because you’ve reduced your total monthly expenses.
Ok, so how should you go about it?
Most people are not actively thinking about their property taxes and believe it’s just a necessary expense of owning a home that they have no control over. But that’s not true. You have a lot more influence over your property taxes than you may think.
I want to share 4 ways to reduce your property taxes.
- Make sure you have applied for a homestead exemption
This is an easy step, but very important. Some people don’t know about this & pay way too much in property taxes as a result.
A homestead exemption accomplishes several purposes. It lowers your tax assessed value for certain taxes because you live in the home (i.e. it’s your homestead). It also caps the yearly increase that the appraisal district can raise your taxes by.
The second benefit can really save you a lot of money. For instance, in Texas, the homestead cap is 10%. That means that the appraisal district cannot raise your tax assessed value by more than 10% a year. If you don’t have this exemption, they could raise your assessed value without limit.
Make sure you have a homestead exemption for the house you live in with your county’s central appraisal district.
- Protest your property taxes every year
As you have probably seen, each year you get a statement from the appraisal district letting you know about their proposed increase in taxable value for your property. It also tells you how much time you have to protest if you want to negotiate the value with them.
Remember, your property tax values are a negotiation. The appraisal district gets the final say, but you can certainly negotiate with them based on data you’ve gathered from your area. And I’ve found over the years that the negotiations usually save me a lot of money.
I just protested our property taxes for this year and was able to get them to reduce my taxable value by around $100,000. That saved me a huge amount in additional taxes.
I think many people don’t protest their taxes because they assume it will be a big hassle. It’s really not, and it’s worth the time you spend.
Here was the process I went through this year:
- After I received the statement from the appraisal district about the increase in my property taxes, I went online to our county appraisal district website and filed a protest.
- They scheduled a hearing for me with the Appraisal Review Board for a few weeks later.
- During that time, I gathered some data from my neighborhood that I thought would help me with the negotiation.
- Before meeting with the Appraisal Review Board, an appraiser from the county offered me an $85,000 decrease in my tax assessed value. He said I could take his offer or still make my appeal to the Board. I thanked him for his offer, but thought I could possibly get even more of a reduction with the Board. When I met with the Board, I told them that I’d like a reduction in my tax assessed value and they agreed on a $100,000 reduction.
That was it. Simple & painless and I saved several thousand dollars for the year.
I encouraged my Mom to follow this same process & she also got a big reduction. I’ve found the appraisal district often gives you a reduction, even if you don’t have much evidence, just for taking the time to protest.
Don’t miss this opportunity!
- Claim any other exemptions you qualify for
The appraisal district offers other exemptions as well that you may qualify for.
I have a home in a historic district and if I can show that I spend at least $10,000 every 10 years keeping the property in good condition, I qualify for a 50% discount on my city taxes. This has saved me about $1,000 each year in property taxes.
Another common exemption is the 65 & over exemption. If you’re 65 or older, you can get thousands more reduced from your tax assessed value for certain taxes.
There are often other exemptions, so check with your appraisal district to see if you qualify for any of them.
- Buy a home with a lower tax assessed value
This may seem obvious but can be a great way to reduce your property taxes. You can buy in an area where the taxes aren’t as high. Perhaps there’s a nearby community or suburb where the tax rates are lower. Or you can just buy in another neighborhood where the price per square foot is not as high. You don’t necessarily have to get an inferior house to the one you have now to reduce your tax burden, you may just need to switch neighborhoods or communities.
Reducing your property taxes doesn’t take a lot of time and can save you quite a bit of money in the long-term. Then you can use that savings to help with ongoing costs, invest for the future, or give generously.
