Do property taxes ever decrease?

21 Replies

Has anyone who's been at the game longer then me ever seen property taxes decrease in an area? Or once there implemented it's almost impossible to go back? I have an offer in on 2 Duplex's in Lake Country IL. With 3.2% tax rate. The Deal is ok at 3.2%, bad at 4% but would be awesome at 2%. Is it safe to say I'll see 4% before 2%?

@Michael Bettencourt I have seen taxes go down. Typically it's when some disputes the assessor with a legitimate lower valuation claim.

Don't ever count on it though. If you are sitting there counting nickels with regard to your tax rate, your deal is too tight and you need to let it go or re-evaluate it.

I would offer a link to an article by an attorney in the greater Chicago land area. But, the last time I posted a helpful link  BP took down my post. So much for offering suggestions. Beware,on the North side of the city and with some of the suburbs we saw larger apartment complexes get a tax bill 3 times higher than the previous year. Not to mention we are fighting rent control.

Chicago is hands down in the Top 4 worse States to purchase Real Estate in . Including Dupage , Kane , Cook etc . I am not saying don't purchase ; it's undisputable Facts that have never gone away . Returns don't make any sense now

Yes.  Property Taxes have both gone up and down on my Indiana properties over the last 10 or so years.  

@Michael Bettencourt I always appeal my property taxes both for my personal and my investment properties. You can hire a lawyer who, aside for filing fees, will only charge you if they get your taxes reduced. I’ll admit you’re less likely to get a reduction as prices are at or near their highs in most areas but there is very little downside in trying. Also if they feel like you have a strong case they may ask you to pay for an appraisal but again it’s often worth doing. I’d say I win 90% of my appeals so it’s worth a shot.

Originally posted by @Michael Bettencourt :

Thanks! We’re the reductions you saw due to the decrease in home value? Or and actually decrease in % if assessed value?

I think I get what you are asking but maybe missing the nuance. I think the way to think about it in the BIG picture is....are the costs of governing and providing the services that property taxes support ever going to go down? Probably not, and certainly they will never trend down. So if the things that property taxes pay for are always going to get more expensive, then the government can never allow property tax revenues as a whole  to trend down. There will be years of lower revenues but in general overall property tax revenues have to keep going up. So the answer is kind of no.

But in the smaller picture, lots of things can happen to make your taxes go down. From appeals to legit lowering of assessed value to lowering of actual tax rates. There are lots of variables. Rates can go down but assessed values can be adjusted up so that your actual tax bill in dollars goes up. Or vice versa. Either tax rates or assessment value can go up but the other can go down to offset and your total tax bill is reduced. So the answer is kind of yes. They are never going to trend lower for you but they will frequently adjust lower and might be less for a period of several years before the upward trend continues.

And in lots of cases, laws will change which shift the whole equation. Many years ago, Michigan changed their laws to have sales tax pay for schools, I believe, instead of property tax paying them as usual. Our property taxes were cut 75%. There was an offsetting increase in sales tax but to the extent you consume goods you might pay more or less in total dollars. It certainly changed the equation for landlords.

My guess is that you have only been investing during the past few years when the economy and values only increased. So you are only seeing things move in one direction. That is how it works. But there are cycles and the next one will come eventually. You will see that things can go the other way very dramatically. 10 years ago there were people on BP asking if things will ever go up again.

Some people can become overly focused on taxes because they are annoying. Try to be realistic. If the rents you are receiving are going up and the value of your property is going up, shouldn't you expect and be willing to accept that your taxes will go up? Focus on taxes relative levels compared to your rent, your cash flow, your property value.....rather than absolute dollars. If taxes are going up when values and rents and services are going down, then that might be the time to complain. Probably still won't do any good though because costs of government are still going higher.

@Michael Bettencourt yes taxes can go down.  sometimes the appraised value (by city or county bureaucrat) can be less than previous years.  have a look at anything between 2008 - 2013 and you're bound to notice a lot of decreases.

@Eric M. great info! If home values go down won’t the % of tax paid stay the same or increase to compensate for decreased revenue; as the cost of running the city didn’t decrease and lord knows government becoming more efficient isn’t an option.

Originally posted by @Michael Bettencourt :

@Eric Michaels great info! If home values go down won’t the % of tax paid stay the same or increase to compensate for decreased revenue; as the cost of running the city didn’t decrease and lord knows government becoming more efficient isn’t an option.

Well, it depends short term vs long term. Depends how fast or far values drop. Governments cannot move tax rates as quickly as values can move so there is always lag. 

But as I said, yes, the general trend is always going to be up. Just like the longer trend of values and rents and other expenses is generally up. It is called growth, and inflation.

But what is the whole point to your question or your concern with property taxes? The answer is the same everywhere....every state every some degree or another.  You have mentioned total $ of tax, "% of tax paid", tax rates, assessed values. All different numbers and different concepts which have different effects and can be more or less relevant in a given situation. 

You started out asking if they ever decrease. The answers you got say yes, the can certainly decrease. But as with everything, there is more to it. So what is the real question?

I am not really sure what your focus is or your concerns are. What are you trying to analyze?

I am going to trial tomorrow for an appeal ironically in NJ. The city chose to use the income approach when valuing my 2 family house (when an appraiser will NEVER use the income approach). They did that of course to generate more tax revenue for the municipality. They have more than doubled my property taxes in one year due to improvements I made when my rents did not double. Not going to stand for that.

In Texas we are having a property tax increase crisis. Some appraisal districts have gone completely off their rockers and decided to do whatever they please disregarding what the property is worth and what it can be actually sold for. 

Some family friends of ours had their taxes go up 6000%, yes SIX THOUSAND, since the purchase of the property about 5 years ago. They have fought the first round and they didn't even get to present the case before they district all but told them to F-OFF. Second round ahead and then lawyers start getting involved.