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June 22 • 12:25 PM
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Rising taxes amid declining values?



shadow
shadow
July 25, 2007
Alex,

I just received my tax bill for this year and my taxes went up from last year. Haven't home values declined in the last year? Why would my taxes go up even though my value has gone down?

— T.K., Attica.

T.K., Property values have declined significantly in the past year or so and many homeowners are upset about rising taxes. Let me explain how the process works. There are many reasons your tax bill went up this year. First, the school millage that you used to pay on your December tax bill was shifted to the July tax bill so that schools received the money by the time school starts in the fall. This is not a tax increase but just shifting when you actually pay it. This increased your taxes in the summer by the same exact amount that they will decrease your taxes in December. However, this is not the only reason your taxes went up this summer. I pulled up your home's tax information on public records and the reason your taxes did go up this year is because your taxable value increased. You have lived in your home for many years and because of that your taxable value has only risen slightly while your SEV has gone up significantly. In your case your taxable value was $44,000 while your SEV was $85,000 in 2006. This year your taxable value rose to $45,400 while your SEV dropped to $80,000. What this means is your assessor did have a value of $170,000 for your home last year but reduced that to $160,000 this year to reflect the current market. However, the SEV has no bearing on the taxes you pay since that is what your taxable value is for. FYI, your taxable value cannot be higher than your SEV. Since your taxable value is below the SEV the assessor increases your taxable value by the rate of inflation or 5% whichever is less-in your case they increased it $1400. This means your taxes will be slightly higher even with the same millage rates because it is now based on a taxable value that is $1400 higher. Until your taxable value is more than half what your home is worth there is not much point arguing that your taxes should not be going up. Even in today's market your home is worth $160,000 home but you are only paying taxes based on a home worth $90,800. Keep in mind your neighbor who just purchased their home for $160,000 will now be paying almost double what your taxes are even though the homes are identical.

Alex Lengemann is a licensed Real Estate Broker who operates RealtyVolution.com, a local real estate company. You can Ask Alex your real estate or mortgage questions by phone 810-664-1819 or by email Alex@RealtyVolution.com.

— ADV

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