Rory S. Coakley is founder and president of Rory S. Coakley Realty, Inc., a full-service residential and commercial real estate company in the Washington area.
As the age-old adage by Benjamin Franklin states: “Nothing in life is certain except death and taxes.” True to form, the issues of taxes and assessments continue to hold significance in our day-to-day lives. In the real estate world, taxes and assessments are a regular issue for property owners and tenants across the board, from residential to commercial and investment properties.
Real estate taxes are a reality. They are tools used to finance school systems, state and local governments and other key aspects that keep our daily lives humming along. But how are they calculated? What is the assessment process? The answer is it varies by state and the ins and outs of the methodology may result in some surprising, little-known facts that can help you understand the appeals process, ensure your tax bill is accurate and save you money in the long run.
The next round of reassessments just hit Maryland mailboxes this month, and will be followed closely by those for owners in the District and Virginia. It is more important than ever to understand the process and your rights to file an appeal.
Here is how the process works in the three local jurisdictions:
In Maryland, tax assessments are prepared for one-third of the state’s property owners every three years. This work is conducted during the summer months and mailed to owners by the end of each calendar year. This can be problematic, as property owners can potentially be assessed for taxes on properties based on the condition they were in as much as several years prior — a time period where many changes, good or bad, could have taken place that would not be reflected in the current assessment.
The property owners have 45 days to file an appeal to the reassessment notice if they desire, and this may be done in person, by phone or mail. Once the appeal is reviewed, the owners have the option to take the appeal to the second level, the Property Tax Assessment Appeals Board (PTAAB), if they are unsatisfied with the decision.
A third and final level, the tax court, is available after the appeal process chain comes to an end, unless the case is taken to some higher level of appeal after the tax court phase. While an appeal is in progress, the property owner is still required to pay the tax bill as originally assessed. If any changes result from the proceedings, the property owner is due a refund with interest.
Property owners in Maryland also have a few other little-known options to appeal their tax assessments. One is the ‘out of cycle’ appeal, which can be filed during the second or third year between assessments on their property. Also, for property sales that go to settlement between Jan. 1 and June 30 of a given year, the new owner has an opportunity to file an appeal on the property for the next tax bill in July, within a 60-day window.
The District and Virginia
In the District and Virginia, real estate tax assessments are conducted on an annual basis, as opposed to the three-year cycle used in Maryland. In each jurisdiction, property owners are given a 45-day window to file an appeal.
The appeal process also consists of three levels, the first being filing the initial appeal. If that decision is unsatisfactory to the owner, the appeal moves to level two — the Board of Equalization. Here the appeal case is presented in a mini-trial format to gather key facts and information for the board to come to a decision on the matter. The third and final level, similar to Maryland, is the tax court.
While much of the nitty-gritty of the appeal proceedings between Maryland, D.C. and Virginia are similar, many would argue that D.C.’s and Virginia’s processes, and the resulting assessments mailed to the property owners, tend to be more accurate overall because of the annual review process.
So what is most important for property owners to know to ensure they are in a good position with respect to taxes assessed and charged on their property?
Here are some tricks of the trade:
- Review your assessment notices and worksheets carefully. Potential errors are common in assessments, whether through unknown changes in property condition or significant market changes, or understaffing at local offices. This could cause you to pay higher taxes than necessary.
- Consult a tax appeal representative. This person can review your case, determine if an appeal holds merit and help you navigate the often convoluted system used to generate assessments to potentially save you thousands of dollars. A tax appeal representative is an essential asset to provide leverage to advocate for you in an appeal situation. They have access to a number of key resources, including comparative sale data, actual rental rates per square foot and vacancy rates for residential and commercial properties.
Being aware of and using the process each jurisdiction offers can help ensure that you are paying your fair share of real estate taxes, potentially saving you thousands of dollars each year.
Previously from Rory S. Coakley: