How much will Taxes increase after purchase

Question

Before I buy a property I want to know how much my taxes will increase after we agree on a purchase price.  I know this means a lot especially when you move into commercial real estate, anyone have or know of a good way to find out how much taxes will increase after you buy?

Troy Gandee · Answer

Actually, I think I just realized what @Jonathan Twombly is referring to. I thought he was referring to an annual tax rate similar to the 4% assessment ration of an owner-occupied property for non-resident real property.

I think what Jonathan is referring to is a 2011 law called something like the ATI law. What this says is that upon the transfer of interest of a property (new sale, or point of sale as it's usually called), if the new sales price of the property is significantly higher than the assessed value, then you can apply for a 25% reduction of the new assessed value per the market price. Ex. If the property was assessed at 50k and you bought it for 100k, then you can apply for a reduction of the assessed value to 75k, which will carry on from point of sale forward until the next reassessment. But, if the 25% reduction were to be lower than the previous assessed value, they will still take the original assessed value as it is higher. I've never needed to do it because I usually buy pretty beat up properties below market value and I've never personally bought a true commercial building that has experienced that kind of appreciation as to need this. There's also a law in SC that does now allow the assessor to assess a property more than 15% above the previous assessment. I've never seen the appeal form, but I have a closing today and I'll ask my attorney if he has a copy.

Dan Mahoney · Answer

Account Closed This is going to vary significantly by locality and is usually not known with certainty in advance of buying.

In many places, you could get to a reasonable estimate by assuming the property gets re-assessed based on the new purchase price and then multiplying the updated assessed value by the millage rate(s) for your area.  But each state has different rules and counties and municipalities have different policies within states.  And local governments don't always enforce their own policies consistently.

Sorry if this isn't the answer you were looking for.

Jonathan Twombly · Answer

Account Closed It's impossible predict with 100% accuracy, but you should be able to get a ballpark idea for your underwriting.  First, you need to figure out what the taxing authority is.  Is it the city or the county or something else?  Once you figure that out, the information for calculating the taxes should be on that authority's website.  I also find that, if you are buying outside a large city, you can just call the tax assessor and ask how to do the calculation.  A lot of the time they are very happy to get a call to break up the monotony.

This can be a very complicated area so make sure you understand it thoroughly.  And some jurisdictions have little gotcha tricks.  In South Carolina, where I buy, you can get an automatic 25% reduction on your assessed value if you ask for it.  But it's not automatic, and you have to ask, by filing a request within a year after you buy.   A surprising number of people don't know to request this and leave a ton of money on the table.

Troy Gandee · Answer

@Jonathan Twombly are you referring to the 4% exemption? As opposed to the 6% assessment ratio? I have never heard of any kind of reduction in taxes other than the 4% tax exemption, which is reserved for owner-occupants and not investors.

Amy Bates · Answer

@Jonathan Twombly, my husband and I are investing in South Carolina.  Can you elaborate on the automatic 25% reduction.  Is that only for commercial or for residential too?  What is the process to go about making the request?  Any insights would be greatly appreciated.

Greg H. · Answer

There is no way to answer this question. The amount of the property tax in Texas does not change based on the property selling.  The amount of the property tax is based on the value of the property on Jan 1 of each year

So if you bought a property this year the valuation has already been determined as the day to protest (May 31st in most cases ) has passed

The valuation for next year will be Jan 1st and the valuation can then go up or haha down

How much will Taxes increase after purchase

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