How to Successfully Appeal Property Tax Value

When the leader of the free world, excuse me. When Brandon Turner, the leader of the financial freedom movement known as BiggerPockets, calls you out on your own closed facebook group [ Real Estate Investing for the W2 Employee] to write a blog entry on something I shared…you kind of just have to.

A little background: this was our first apartment complex purchase and I’ve never appealed a Property Tax Value before. Total newbs here. As I typically do on newb situations, I reach up and out to find someone or someones who have successfully appealed before. I found several but the impression I received is this was a painful process that more times than not, was not a successful endevaor. I felt I had contradictory evidence and it was a no brainer to give it a try. I was also determined because our purchase price was half of the tax accessed value, so I pressed on.

  • Purchase Price: $700,000
  • Tax Accessed Value: $1,501,000

I did receive some advice to send the appeal through my lawyer on his stationery. This prompted me to call him and in his true, calm demeanor, advised me that wasn’t necessary at this point, “just follow their process and call me if you run into issues.” Done. And this is what I did.

In our county’s particular situation, they send out a notice of the taxable value for that year and you essentially have 30 days to submit your appeal.

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If your not familiar with your counties’ property appraiser’s website, starting using it daily until you do. We invest in several different counties and these are some of the most cumbersome sites to complete a successful search. Practice makes you less insane, I mean perfect.

Here’s an example of many property tax limited search functions. This was a real scenario where I finally just called the county’s property appraiser’s office:

Me: Hello Ms. Property Tax office worker lady. I’m trying to find my property on the county’s website and it appears to not be listed. Here’s my address…

Ms. Property Tax office worker lady: Yes it is listed. The site recognizes the word Drive as just the letters D-R. And don’t put the period on the end of DR. That will cause it to be confused again.

 

The takeaway here is use your county’s property tax and appraisal sites often to accept and appreciate its quirks. And you have to appreciate them, doing anything else will result in frustration.

Ok, back to receipt of the tax notice….

So we’ve received the tax notice, we had 30 days to appeal and the notice came with a couple pages of instructions.  The amount of documentation they are requesting may seem overwhelming. I initially thought, no way they want or need all this, but I did want to follow the instructions to a T. So, I loaded ’em UP!  The picture at the top is this post is the actual documentation I sent. Well over 500 pages.

Our county required the following: portion of the tax form that had to be returned (and on top) of all other documentation. This was a single page consisting of a few short answer questions. Also required were copies of every lease on file, a copy of the HUD and all closing documents, and all documents had to be shipped in a USPS envelope by a certain post mark date – I went with the tracking number option.

Once I saw delivery was confirmed from the tracking #, I called the property appraiser’s office to confirm. No doubt they were inundated with requests and while they couldn’t initially find my submittal,  they took down my information and I noted the person I spoke to and created myself a reminder to call back in a few weeks. With some follow-up they confirmed receipt and noted actively processing our appeal.

Decisively following those instructions explicitly, comprehensively and meticulously, led us to:

VICTORY!!!

 

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This reduced our tax bill by approx. 40% and our accessed property tax value is now more in-line with the purchase price of the property. This will save us and our partners thousands of dollars this year.

In summary:

  1. Become familiar with your county’s tax accessor and appraisal websites, use them regularly.
  2.  Know when to expect your tax notices will arrive and how long you have to appeal (post mark dates are the deadline to appeal).
  3. Follow the directions explicitly. Dot all your I’s and cross all your T’s.
  4. If mailing, be sure to go with an option that provides a tracking #.
  5. Once you submit your appeal, follow up with a phone call to your tax accessor, ensuring they received it. Make note of the time, day, and person you spoke to.
  6. Patiently wait…
  7. Be on the lookout next year. You may have to appeal again!

 

Thank you for the challenge Brandon Turner!

 

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Tax Season: How Real Estate Can Affect Your Tax Return

First things first, I’m not a CPA or tax attorney and this or any post should not be considered legal nor accounting advice 🙂

But if you’ve bought or sold real estate in the past year, either for yourself or as an investor, you’ll need to make sure the good ol’ IRS knows what you’re doing. Real estate purchases and sales can definitely have an affect on your tax return, and if you aren’t careful that can result in you owing a lot of money at tax time. Naturally, that can be a nasty financial surprise that you’ll want to avoid. Some of the tax concerns may be inevitable, but you can avoid most of them with some careful planning. When you buy and sell real estate as an investor, you’re running a business. The profit you make will be subject to tax just as it would with any business, but you don’t have to worry about capital gains tax and related issues that come about when you sell the home you live in (as long as you’ve lived there for at least 2 years). There’s also some fancy stuff you can do with what’s called a 1031 Exchange to defer taxes into a new purchase, but this is certainly where you will want some help from your CPA or tax attorney in Pensacola.

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Sellers who decided that they wanted to move, and sold their primary home, will be asked some questions at tax time. The IRS will be looking to see how long they owned that home before they sold it, and if they made a profit on it. If you lived in your home for at least two years before you sold it, you probably don’t owe any tax unless you made a very big profit on the sale. If you didn’t live in it for two years, though, you’ll owe capital gains on the profit of the sale. Fortunately, most people who don’t live in their house for at least two years don’t make a profit, because it takes a while to get real value out of buying a house. Because of that, they will likely not owe anything extra at tax time.

Buyers can get tax breaks for purchasing a home, because they can now take a deduction for the mortgage interest they have paid. The mortgage company will send them a statement detailing how much they paid in the prior year, so they have that information for their taxes. Of course, if you buy a home and pay cash, you won’t have that mortgage interest deduction to use. If you make improvements to your home, some of those are also tax deductible (like energy tax credits – https://www.irs.gov/uac/Form-5695,-Residential-Energy-Credits), so you could save some money on your taxes in that way, as well. The best choice when buying or selling a home is to talk to a tax advisor and make sure what you’re doing isn’t going to cause you tax trouble.

Remember, if you purchased a home recently in Escambia County, the deadline to file for homestead exemption is March 1. Here is more info from the Escambia Tax Collector’s Office: http://www.escambiataxcollector.com/ad-valorem-assessments .

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If you ask first, and get some answers, you can buy or sell a home in the Pensacola or Cantonment, FL area without fear of a big tax bill. In some cases, people have waited to buy or sell until a certain date (such as owning a home for a full two years before you sell it), so they can avoid any chances of seeing their taxes go up. That makes sense, and can be the right choice when you want to make a move in the real estate market but you don’t want to be paying extra for it the next time April 15th comes around.

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Capital Gains Tax on Divorce Settlement including a Real Estate Transaction: Who Pays?

Divorce can be messy, from a financial standpoint. It can also be very stressful, and can take some time to complete. With that in mind, there are often nuances and subtleties that people overlook. One of these issues is capital gains tax on divorce settlements that include a real estate transaction. For example, many people who divorce sell their homes, and they split the amount of money they receive from the sale. That makes things fair and equitable.

When they have Pensacola, FL investment property, though, that can change the game. Investment properties are subject to capital gains tax when they are sold, and that tax amount can be very high. If there is a large gain on the sale of the property, the amount owed could easily be into the thousands of dollars. Who pays for that can depend on several factors. If the divorce decree spells out who is liable for that tax, that will settle the issue regarding the property for sale. The decree must be followed.

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If there isn’t anything in the divorce decree about the property or properties for sale, though, there may be a fight regarding who has to pay the capital gains tax. It could come down to whose name the property was actually in, and/or who played a more significant role in the management of the property. Often, it will be up to a judge to decide the outcome. Before any of that takes place, though, the property has to be sold. Rather than list it with a real estate agent and wait for months, you can contact a company that buys property for cash. Often, getting it sold quickly is just a phone call away.

There’s a lot less to worry about when the property is sold for cash, and the closing will be much faster. That can be a very popular option in a divorce, when people are looking to break all of the ties they had to one another as fast as possible. Owning joint property can make it feel as though they are still married, and that is usually the last thing they want to deal with. With a cash deal, you won’t need to wait for months and compete with all the other properties for sale and the multitude of MLS real estate listings.

Instead, you’ll work with an investor or company who wants to buy the property quickly, and for a fair price. Before you know it, you’ll be out from under the property, and you won’t have to be tied financially to your ex-spouse. That doesn’t solve the matter of the capital gains tax, though. If you both owned the property equally, the tax should be divided equally in many cases. However, every divorce is different, and there are often extenuating circumstances. For example, one person may have had a very good job, and the other may have been a homemaker. The distribution of money could be very different for those individuals.

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It’s best to work with your divorce attorney regarding who might have to pay what amounts, so you won’t get caught by surprise when the property sells and capital gains tax is owed. It’s much better to be prepared in these types of situations, as much as possible. Then you can sell the property quickly, know where you stand with taxes, and move on with your separate lives, after the divorce is finalized. Dragging out a sale on a property can make the divorce process worse, but a quick sale can help bring peace of mind and closure.

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