A dear client and friend of mine reminded me that tax grievance time is approaching, and that maybe I should guide readers on the process, which I often do with my sellers and buyers. What does tax grievance mean? In our neck of the woods, you will indeed find yourself grieving the cash that comes out of your wallet to pay those exorbitant taxes, but that’s not what I’m talking about. To best explain the process, let’s start with the assessment process. Property taxes are based on two components: tax rates and tax assessments.
The tax rate, quite simply, is the percentage at which a home owner is taxed based on their property’s assessment. The overall tax rate is comprised of individual tax rates for school, county, town/city, special districts, village (if applicable) and library (if applicable). The assessment is the town or city’s opinion of a property’s value, and is expressed by a multiplier and Residential Assessment Ratio (RAR). For example, a property in a town with an RAR of 1.71, with an assessment of $13,509, will translate to an assumed market value of $790k. This is how you figure out what the town thinks it’s worth: divide the assessment by the RAR, so 13509/.0171 will give you the full valuation per the town. Sounds confusing? It is, and intentionally so in my opinion. It makes it much harder to catch on to the fact that the town thinks your property is worth $100k more than it really is. You have to do math to decipher the valuation, and the lay person seldom understands how assessments work, or what a residential assessment ratio is. The equalization rates in Westchester county are notoriously confusing, and have resulted in great inequity in tax payments. Some homes that were purchased at the height of the bubble in 2005 or 2006 are taxed at an inflated rate, because the town thinks they are worth way more than they are, while some other million dollar mansions on the river that have not transferred ownership in several decades are often grossly under assessed, resulting in those home owners paying far less than their fair share of taxes. To address this, many towns, like Greenburgh, Scarsdale, Ossining and Mamaroneck have implemented 100% equalization rates, meaning the assessment reflects 100% of the town’s assumption of value. So if the town thinks your home is worth $790k, the assessment will also reflect $790k. The implementation of the revaluation resulted in transparency and equality, but also caused quite the upheaval when previously under-assessed property owners were suddenly hit with gross increases in their tax assessments. It is worth noting that 100% valuation towns will perform annual assessments of property value, unlike the others. It is also pertinent to note that if you purchase a property that is under-assessed in a town on the brink of adopting a revaluation, you are a sitting duck for a tax increase once your deed crosses the assessor’s desk and they see what you actually paid for the property. In towns that do not and will not undergo a revaluation and do not perform annual assessments, you are a bit more insulated from a sudden increase in taxes because they are not allowed to re-assess a newly purchased home if it is not a year in which a routine re-assessment is being performed town-wide. Some towns have tried in the past to randomly raise taxes on new purchases but got shot down in the court system, which upholds a “fair neighbor” methodology. If the town is not also re-assessing your neighbors, they cannot raise your assessment by virtue of the fact that you just bought the home. As a side note, the municipality can and will, however, raise your taxes if you buy a home with newly closed out permits for renovation. The building department and the assessor’s office work hand in hand, and they know that major renovation means major increase in value. So be careful of those “flip” properties with the super low taxes listed. Make sure you visit the local assessor’s office and ask a lot of questions
Ok, so now you have the background… let’s talk about tax grievance. Tax grievance is, simply put, the process of getting your taxes reduced. However, to be clear, it is a misnomer to say that one is “grieving their taxes.” It is actually the assessment that gets grieved. You have to prove to the town that your property is not really worth as much as they think it is. Often times, it’s not a slam dunk process, you only get partial or no reduction at first, and then often have to go before a SCAR hearing (Small Claims Asessment Review) later in the year, around September or so, to get the full amount of the reduction you seek. If successful, your tax reduction will take effect in the following year. If you grieve in 2018, you will not feel the effects until second quarter (usually) 2019, when your school tax payment is due. The actual grievance process is time consuming and annoying, to say the least, and fortunately, you don’t have to go it alone. An attorney should be able to assist you in filing the grievance. There are tax grievance specialists, for example, Richard O’Donnell who do grievances all day long. His website, actually, has amazing resources and a great deal of information such as RARs for Westchester, Putnam & Dutchess, local tax rates, STAR Rebate information, etc. The fees to hire someone to grieve your taxes are usually in the neighborhood of 75% of your first year’s savings. It’s generally worth it for what you will save overall, and spares you the headache of having to deal with the town on your own.
If you did want to go it alone, you must make haste. The tax grievance window is very brief, usually just a couple of weeks in May or June. Here are the deadlines.
Form to fill out: https://www.tax.ny.gov/pdf/current_forms/orpts/rp524_fill_in.pdf
Bring the form, along with supporting documentation for your home value, to the town assessor’s office and drop it off. It’s worth noting that if you live in an incorporated section of a village within a town, you are taxed separately by both and must file grievances with both.
Tip: the best time to grieve taxes is the year of your home purchase. There is no greater indicator of market value than a recent sale in an arms-length transaction. If the town thinks that your home is worth more than what you just paid for it, you should provide your deed along with the filled out form to the assessor’s office and file a tax grievance as soon as possible.
Caveat: doesn’t always work with foreclosures, which are known for generally selling under fair market value, and which they know will be fixed up.