For the last few years, I’ve been getting more involved in my local community mainly through Nextdoor.com and our neighborhood’s Facebook group. I wanted to feel more connected to the people who exist around me. What does this really mean? I spend WAY too much time on social media. AND, I get to see questions that I no longer see in personal finance blogs. It can get a little stale preaching to the choir.
Getting Blind-Sided by Property Taxes
For example, one of my neighbors from Nextdoor.com got walloped by her bank for a couple of extra thousand dollars because her home’s appraised value zoomed up, she escrows, and the bank didn’t take enough every month last year to cover the property tax increase. She knew in passing that the appraised value increased but didn’t know to protest it. She also didn’t know what that would do to her property taxes. So now she feels blind-sided.
Crystal’s Take on Official Home Appraisals and Property Taxes
Here was how I replied:
It looks like a few people have already summarized the process.
We receive our annual property tax appraisals from in the first 3rd of the year. They can increase the value or decrease the value (they decreased our value for several years in our old house down the street during the crash of 2008-2009, but I haven’t seen that happen again). Anyway, if your house has the homestead exemption (you need to file for that if you live in your home and haven’t yet), then they can increase the value by as much as they want BUT the taxes will be capped at a value no more than 10% higher than your previous year. It is still worth protesting so they don’t automatically get to jump up another 10% the year after. Here was my blog post about our second time protesting our property appraisal:
If they appraise your home value as higher and you don’t protest or you lose the protest, your taxes will be higher at the end of the year since they are based on that appraised value. We don’t escrow, so we get the property tax bills at the end of the year and wave goodbye to $12,000+ for our two houses in our county. You escrow, so your bank estimates what they think you’ll owe and bases your monthly payments on that all year. If they over-estimated, your monthly payments will decrease next year. If they under-estimated, they will increase. If they underestimated by a lot, they will request a chunk of change like they did with you.
In the future, you can make a good guesstimation if they will be way off or not by taking your official appraised value, multiplying that by 3% (our overall property tax rate rounded up), divide that by 12, and see if that number added to your actual mortgage amount is less than or greater than what they are charging you.
For example, they raised my appraised value to $306,000 a couple of years ago despite my protest (they were trying for $330,000 from $289,000). Anyway:
306,000 x 0.03 = 9180 (guesstimated annual property taxes on my house)
9180 / 12 = 765 (guesstimated monthly taxes)
765 + 990 (our actual mortgage amount) = 1755 (guesstimated monthly mortgage payment if I escrowed)
So if my bank was charging me less than $1755 a month, I will expect to pay more at the end of the year or more in next year’s payments since they won’t be charging me enough to cover this year’s property taxes.
If my bank is charging me more than $1755 a month, I will expect a refund check at the end of the year or lower monthly payments next year.
You can write off your property taxes but there is a limit. If you sold your home last year there are a few tax write offs for sellers to consider.
Overall, my general advice is to ALWAYS protest your property tax appraisals or higher someone to do that for you. The company mentioned in one of the replies above charges you based on what they save you, so that is better than not protesting at all. Then, keep an eye on your monthly payments so you know if you need to start saving for a chunk of change extra to be coughed up at the end of the year or not based on your final appraisal amount.
Good luck! Feel free to pm me or ask here if you have any questions. My first business before I started Crystal’s Cozy Care Pet Sitting is Budgeting in the Fun Stuff, my personal finance blog. I run both now since I have two true loves outside of my family and friends – pets and budgets, LOL.
Did I cover this correctly? How would you have responded?
FYI: I worked at a dead end cubicle job from 2005-2011 for about $30,000 per year. I went self-employed in July 2011 and make between $70,000-$90,000 through blogging, professional pet sitting, hubby's reffing, and our rental home. If you’d like to start your own site (link to my free step-by-step guide), I highly suggest checking out Bluehost (my referral link with a nice discount for you, PLUS a free custom header banner from me!). Please contact me any time at budgetingfunstuff*at*gmail*dot*com with questions or just to brainstorm! I’d love to help!