Tuesday, March 13, 2007

Small savings now...big savings later

Well we got back our notice from the city, and our assessed value of our home was abated $15,600! That only translates into a $145 tax abatement for this year. However it means that moving forward our tax basis for our house will be lower because of it.

When we bought our place, the cost basis was $x in 2006. We applied for an abatement last year and had it decreased by $10,500! This saved us only $100 last year. However this year our assessed value increased by $16,100 for 2007.

However by challenging our assessment this year in January it was lowered by $15,600, meaning our total increased assessed value for our home was only $500! Woohoo!

So our savings is going to compound annually because we'll be able to slow the "assessed value" of our home. Where we live the property taxes cannot increase by more than 2.5%. Meaning that people who have lived here for 15 years pay less taxes than we do because the assessed value of their homes have gone up very slowly. And because of the size of the city, the assessor's office only reassesses newly purchased homes.

Thus the taxes are extremely disproportionate for new versus long term homeowners. To take advantage of this, we decided to challenge the assessement annually. DH thought it was stupid at first, but now that our assessed value is going up very slowly and more in line with people who have owned for 10 years, he's happy.

Sure it's a $100 now, but in say 3 more years, when our neighbors with the identical unit are paying more it'll be worth it. Right now because our neighbors did not file an abatement, their assessed value is $31,600 more than our unit. We have idential townhouses, except we have the original stairs, fireplace, but brand-new storm windows! They pay $295/year extra in property taxes this year with a $31,600 difference in assessed value.

But because of our lower value, next year our assessed value can only be increased off the smaller number. So though our units are identical, by taking a bit of time to research assessed values, we're going to save more money in the long run. Because every year it compounds the amount the city can raise our taxes!

So small savings now...big savings later.


Gaming the Credit System said...

This is a very good tip! It's one of those things that you sometimes hear mentioned, but the actual process is kind of mysterious. I'm glad to hear from somebody who's actually done it.

You're absolutely right about the compounded savings over time.

Living Almost Large said...

Thanks, unfortunately our is based on the price of unit as of Jan 1, 2006 for FY 2007. So it's a year behind.

Also the abatement is based on sales data of the area and the correlating assessed value.

Another person I talked with told me that people who stay put rarely see an increase in assessed value, thus the significantly lower tax bill.