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If you think property taxes are just one of those bills you have no control over, think again. While reducing your property tax may be more challenging than other tax deductions, it is possible. With the right approach, you can Lower Your Property Taxes and save money. We have some tips to help make it happen.
Before you write off number six, give it some thought. Strategies like these are no longer reserved for the ultra-wealthy, thanks to the availability of information online. Or, if you’re curious about alternative investment strategies, number eleven might be what you’re looking for.
From one-time reductions to long-term strategies, we’ve uncovered thirteen ways to save hundreds or even thousands each year. How many of these strategies will you implement to reduce your property taxes and improve your finances?
1. Request Reevaluation
Typically, when a property sells, the county where you reside will take the opportunity to do a new tax assessment of your property. This means they’re going to bump your taxes based on the assessed value of the real estate, which is based on a combination of factors, one of which is largely the property’s sale price.
In this situation, the best thing to do is to look at the tax-assessed value of homes or real estate in your immediate area. If there is a large discrepancy between what other neighbors are paying and the assessed value of their properties, you may be in a good position to request a reevaluation and a potential reduction in property taxes.
2. Carefully Plan Major Improvements
When a county decides to reevaluate property values, it can seem a little random at times. Like all property tax laws, it varies from county to county and state to state. So, take a look at the regulations where you live. If they mandate reevaluation every five years, like in South Carolina, determine where you are on that five-year schedule.
If it’s year four since the last reevaluation and you decide to do major home renovations, you almost guarantee you’ll pay higher taxes when the assessor makes their rounds. Other events that may trigger an early assessment may include new developments in your area, both residential and commercial, or other community improvements deemed to improve the value of the surrounding area.
3. Research the Tax Rate Before You Buy
City and county jurisdictions can be very counterintuitive. You may live closer to one city but reside in the tax jurisdiction of another. This can create a significant difference in property taxes to the tune of several hundred or thousands of dollars annually.
4. Apply for a Tax Credit
Stay current with local and federal initiatives to see if you qualify for a special credit. For example, clean energy initiatives in some states are still going strong in addition to federal programs.
So, you may be eligible for a tax benefit if you make specific energy efficiency improvements, like adding solar panels or battery storage to your home.
5. Claim Primary Residence Status Carefully
If you’re fortunate enough to have multiple residences, you may be able to reduce your property tax obligation by moving to the home with the lowest primary residence tax rate. However, you may need to do some math to compare tax rates.
If the property tax rate of your secondary home is significantly higher, it may wipe out the savings of having the lowest primary residence tax rate. This is especially true for waterfront property or predominantly tourist destinations.
6. Inherit Your Home
Determining the best way to manage real estate could save you thousands of dollars in property taxes. There are several different types of Life Estate Deeds, such as ladybird deeds, that can be self-prepared or with the assistance of an estate planning attorney.
Life Estate Deeds help legally transfer ownership upon the death of the primary resident. It is vital to explore all the different types of these deeds as they come with varying legal control for the primary resident and beneficiary.
7. Research Tax Relief Programs
Some states have few relief programs, whereas others may have half a dozen or more. Tools like AARP’s Tax Relief eligibility tool can make finding programs in your state quick and easy.
Relief programs may be geared towards low-income residents and seniors, offsetting high costs of essential utilities like heating in northern states or allowing deferral of property taxes in some instances.
8. Claim a Home Office
When you own a small business and work from home, you can claim a tax credit for the space in your home dedicated primarily to your business. There are two different methods of calculating this deduction regular and simple.
Depending on which of the two methods you choose, you can deduct a percentage of all your home expenses like insurance, utilities, repairs, maintenance, depreciation, and more. Though this deduction will not show directly on your property tax, it is a great way to use your home to reduce your overall tax obligations.
9. Use Land for Agricultural Purposes
If you meet the minimum requirements, trees, hay, livestock, and other agricultural projects could qualify for a tax benefit. In most cases, you have a minimum acreage of cultivated or dedicated land for agricultural purposes.
The best part is you do not have to be a full-time farmer to take advantage of these benefits. You just have to show that your agricultural activities are not solely for recreation. Plus, you will likely qualify for other income tax deductions available through your agricultural activities.
10. Gift Property to a Non-Profit
Ever wonder how Scouts of America and Girl Scouts come to own the camps they use for activities? In some cases, wealthy troops raise funds, but in many instances, a benefactor donated their land to the organization.
This is a great way to leave a positive, lasting legacy while also reducing property taxes on a federal and state level. This benefit isn’t just limited to the organizations mentioned above either. You can choose to gift property to any nonprofit you hold dear.
11. Establish a Land Trust
There are generally two main types of Land Trust: Title-holding and Conservation Land Trust. The primary differences are tax benefits and who has legal management or development control over the land.
Conservation Land Trusts or easements offer the best tax advantages and can be designed to better suit the wishes of the landowner. Most conservation trust examples allow for the perpetual protection of undeveloped land as a way to protect against urban sprawl and the overdevelopment of wildlife habitats. The tax benefit of these trusts varies by state and is typically a percentage of the property’s fair market value with an annual cap.
12. Qualify for a Homestead Exemption
The homestead exemption was designed to offer tax relief to persons over the age of 65 and those who are permanently disabled or legally blind. The exemption typically allows qualified homeowners to claim $50,000 in fair market value for their legal residence. This exemption could significantly help those with a fixed income or limited earning potential.
13. Claim Disability
No one should ever actively pursue a disability just for the benefits, but if you have served the public good through the armed forces, worked as a firefighter or police officer, and were injured in the line of duty, you could qualify for property tax deductions in some states.
If you are legally blind or physically unable to earn an income, property tax relief programs are available in most states.
