TAXES, “the one we HATE the most”!

Learn how accurate assessments can help you hate them less.

REAL ESTATE (RE) TAXES?  Yes, out of a list of all possible taxes, RE taxes were the most disliked by a long shot – 42% in a survey conducted by American Enterprise Institute and polled by Gallup, CNN, USA Today and/or the Advisory Commission on Intergovernmental Relations.  Why? Typically, the property tax liability is the largest expense on a company’s operating income and expense statement; an uncontrolled expense that drives CEOs and CFOs crazy.  These fluctuations can, for public companies, mean hitting or missing Wall Street targets.  Some of our PEG (Private Equity Group) clients understand the correlation of having $150 thousand in reduced RE taxes at a cap rate of 6% and how that could add approximately $2.5 million of value to their bottom lines.

The underlying premise is that, unlike all other taxes, there is one with no direct correlation to benefits received.  Sure, we get police, fire, and garbage collection, but there are many services we pay for (like schools) that the single adult (young and old) receives no direct benefit from.  Additionally, this tax is based on your property footprint, its size land and/or improvements.  A larger property gets taxed more than a smaller property, but is there a proportionally greater amount of services?  A greater reason to engage a RE property tax professional to annually review your assessments is to make sure you are not paying a disproportional larger amount. 

Few, if any, European countries have our property tax system.  They have the point of sale tax in which all consumers participate, not just the owners of real estate.

THE BIGGEST DELIMA FOR COMPANIES.  Because RE prices have fluctuated so wildly since the beginning of the recession, these variations in assessments and taxes could be daunting.  Additionally, there is no guarantee that what a company is paying is the correct tax or assessment in relation to comparable properties of similar use or utility.  Unfortunately, there is no uniform system, and RE assessments are dealt with on a county-by-county or state-by-state basis.

The “TOP 10” states with the highest mean RE taxes: NJ, NH, CT, NY, IL, VT, RI, MA, WI, and AK, in that order.  Two ways to offset the pain of RE tax:  RE taxes expense is a tax deduction and the ability of a property owner to challenge the assessor’s opinion of value or the assessment.  Ironically, only approximately 25% of property owners ever appeal or challenge their RE assessment personally or professionally.  This is typically because the process presents itself as being so complicated, time consuming, and legally intertwined that it gets surpassed mostly because of missing the appeal deadlines, typically a 30- to 45-day window.

To afford the best opportunity, one would acquaint themselves with their city and/or county property tax process.  Many, if not most, assessors have online service or there is personal assistance available at your local city or county assessor’s office.  Once you understand the process, deadlines, etc., you should view the information on the property record card to confirm that the information about you property is correct (age, building size, age, land size and number of structures).  Reportedly, inaccuracy rate on assessments is anywhere from 30% to 50% depending on the region.

Accurate assessments and the associated tax can result in direct financial benefits.  The Hilco Property Tax Group is available to answer any of your questions regarding you assessments (real estate or personal property), the process, or how having the correct assessment makes your property more valuable.

For more information contact:

Frank Lima
Director
Hilco Real Estate Appraisal, LLC
(847) 849-2962 

flima@hilcoglobal.com