13 Reasons Why Your Property Taxes Are Higher Than Your Neighbors’
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Property taxes, ah, one of those little life surprises that always seem to hit differently depending on where you live, how much space you take up, and sometimes, it kind of feels like, how the tax assessor feels that day. You’ve been comparing notes with your neighbors and wondering why they’re paying less for basically the same plot of land, and you’re the only one paying more. There are perfectly valid reasons for these discrepancies, but it can be frustrating.
Before you start plotting ways to swap addresses with your neighbor, it’s important to note that the reason for tax differences can vary from quirky local policies to legitimate differences in property value. Let’s jump into the common reasons these tax bills are so eyebrow raising and bring some clarity as to what is causing them.
The Size of Your Lot
Size does matter sometimes. While your neighbor’s house from the front looks just like your own, their backyard might not quite go as far. Even if the extra space is just weed and squirrel habitat, bigger lots generally mean higher property taxes. Check to see if your lot size is double what your neighbor’s is—it might account for the difference.
Local Assessment Practices
Property tax assessors are not all cut from the same cloth. In some jurisdictions, property evaluations are performed annually, while in others, valuations are rarely updated for a decade or more. If your area doesn’t reassess property values often, and your neighbor’s hasn’t had an assessment for many years, their lower tax bill could simply reflect outmoded data. The Lincoln Institute of Land Policy study finds that frequent reassessments lead to fairer tax systems but also result in higher tax bills for properties that are updated more often.
Zoning Differences
The tax rates can be significantly determined by zoning classifications. If your home is zoned commercial or mixed use, you may be paying more than your neighbor, who is just residential. Small differences in zoning laws can mean big differences in taxes.
Special Tax Districts
You might not even know that you live in a special tax district, which levies extra taxes to pay for projects like better roads, new schools or sparkling parks. And these districts are often based on neighborhood boundaries, meaning your street could be contributing to a gleaming new library, while your neighbor’s block is tax free. It’s not exactly fair, but it’s how local governments pay for community projects.
Age of the Home
There may be a tax advantage to older homes that have been “grandfathered in” under an older tax code. Your neighbor’s charming but slightly drafty Victorian might be older than all of your 1990s suburban dreams, but that means it will likely have a lower tax bill. Newer homes may have better insulation and newer designs, but the tax collector doesn’t give you a break on that.
Municipal Budgets
Tax revenue is allocated differently by different towns or cities. Your tax bill will include the costs of your town investing in infrastructure, public safety, or other big projects. Meanwhile, your neighbor living in another town over will likely live in an area with less in the way of expenditures, and less in taxes.
Property Tax Caps
Property tax caps that limit how much taxes can rise annually, exist in some states. Your neighbour may have owned their home for decades, and your state may have such caps, so they may have an artificially low tax bill compared to yours. These laws can help long time homeowners better predict what their tax bills will be but create unfairness to newer residents.
Differences in Home Improvements
If your kitchen is graced with granite countertops or boasts a deck for barbeques, your home may well be the neighborhood envy. However, those upgrades also turn your property into a more valuable asset in the eyes of the taxman. Your neighbor’s avocado – green 1970s kitchen, untouched? Perhaps, it could be saving them hundreds of dollars each year in taxes.
Valuation Appeals With Differences
A few homeowners are more proactive about appealing their property tax assessments. If your neighbor spent the time to argue their house down in value, they are paying less while you are paying more. Even though filing an appeal seems like a hassle, it could save you hundreds or even thousands over time.
Exemptions and Tax Breaks
Senior citizen discounts, tax breaks, and homestead exemptions make a big difference. Your neighbor may be eligible for veteran exemption or reduced rate because of age or income. Yet you’re still paying full price. Call up your local tax office to find out if you’re leaving money on the table.
Market Timing
Your property tax bill may also depend on when you bought your home. If you bought during a market high, your home’s assessed value will be that sky high price. On the other hand, if your neighbor bought in a down market, their assessed value might be much lower even if their home’s current market value is comparable to yours.
Errors in Assessment
Mistakes happen; assessors are human, as well. If your tax bill seems larger than you anticipated, take a look at the details. Sometimes it’s an error in square footage, number of bedrooms, or some other property detail that inflates your taxes. Just don’t think the system is perfect; some homeowners can get relief just by checking the math twice.
School District Funding
Property taxes may go up if you live in a top rated school district. Schools are typically funded through local property taxes, so if your house lies within the boundaries of a high rated district, you’re probably paying more. Your neighbor just over the line? They may not be putting anything in that same education pot.
Disclaimer: This list is solely the author’s opinion based on research and publicly available information.
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