Taxes are reduced through getting a reduction in the Full Cash Value / Market Value of the property, or through correcting an inaccurate “Property Classification”.

In Arizona you can appeal the Full Cash Value / Market Value (or correct the classification) during the 60 day period after the “Notice of Value” is mailed out by the assessor (anytime between January and March 1 for the following tax year). Example: Maricopa County 2010 valuation notices were mailed January 28, 2009; they can be appealed until March 28, 2009 through the administrative process, or until December 15, 2009 through Superior Court (with some restrictions).

You must prove to the Assessor that your property is worth less than he says it is (or that your property is unfairly valued in comparison to those of your neighbors – “similar properties similarly situated”).

You have to demonstrate this overvaluation with evidence. Simply stating “my taxes are too high” won’t convince the assessor.

The theory is pretty simple. Reduce the value that the assessing authorities put on your property, and the taxes will go down (unless the tax rate rises more than the value goes down).

There are some additional wrinkles that have to do with possible exemptions which may be allowed in your jurisdictions (widow/widower, veterans, retirees, old age etc. for residential properties, and allowable exemptions for medical, religious and other uses on other properties)

Making it happen takes skill, time, and dedication– “the devil is in the details”.

You need to prove to the assessing authorities that the value of your property is less than they say it is.

Each state and many local political jurisdictions have different laws, rules, regulations and steps that have to be followed, quite precisely, so that a valuation appeal doesn’t fail because of some technicality.

You need to check for the assessor’s accuracy of facts, such as overall size, number of rooms, number of bathrooms and number of fixtures, age, materials, roof type, land size, zoning etc., so that any errors can be corrected. Sometimes if you discover an error you can obtain retroactive corrections and tax refunds.

In addition, and this is the key, you have to gather convincing data and information, supported with appropriate PROOF that your property is over-valued according to local laws and regulations or being discriminated against because your property is over-valued when compared to “similar properties similarly situated”.

Also, pay close attention to local rules and practices. Most areas value the property at “full market value”, but some use a lower percentage (for everyone), which may lull you into a false sense of security. Some areas have different classifications for different uses – residential, commercial, vacant land – and these need to be correct.

Once you have all your facts together you have to present it (or “sell” it) in a clear and convincing fashion. Sometimes this is written, sometimes it’s a presentation in front of a representative of the assessor, a hearing officer or a board or panel.

You should always check the assessor’s record for errors, because that kind of an appeal is pretty straightforward (unless of course you have made recent improvements that you don’t want to “share” with the authorities).

The quick test which we always recommend is to get a rough idea what your property would sell for, today, and compare that with the assessor’s estimate of value (assuming that you are in a 100% valuation jurisdiction). If you’re way below you’re probably ok, and if you’re way high, look further.

This quick question is not the final answer, however, because you may be valued “differently” than your neighbors, and that may be a basis for following an appeal.

It is certainly something you can do yourself. You need to understand the rules and the process, and be careful and diligent and smart in your work.

There are competent property tax professionals who can help you. Working with a professional has to make economic sense for you and for the professional. Generally the higher the value of the property, or the more complicated, it’s smart to look for professional help. Make sure they have experience in your local area.

Personal Property

Some jurisdictions tax personal property, some don’t, and some tax only certain personal property.

In Arizona, our home base, there is a tax on Business Personal Property.

Each taxpayer is responsible to “self report” their business personal property to the county every year (by May 1). The county wants to know what you have added or disposed of in the last year, what is the value, and into which of several different categories does it fit. Categories are important because different depreciation rates are applied to the different categories.

There is an exclusion for the first $50,000 (indexed for inflation) worth of business personal property, and you are taxed on the balance.

The assessor has an audit section and they go around to make sure that everyone who should be is reporting their property, and that it’s accurate.

If they find under-reporting they can go back and assess you for the prior three years and impose a penalty of up to 100%.

Sometimes it gets pretty strange. For instance, underground storage tanks at a gas station are “personal property”, even though they are buried in the ground.

Valuations for property tax purposes are not the same as valuations for income tax purposes, and depreciation schedules are different, so you can’t just send the county the appropriate schedules from your tax returns.

It’s a time consuming and irritating process, and mistakes can be costly.

If you’ve got a large operation it makes sense to get help from someone who understands the Personal Property Tax System. Unless your accountant does this kind of work regularly he may not have all the necessary information. You may be well served to have another professional work with your accountant to make sure you’re not leaving something on the table, or are not exposing yourself to a large penalty.

Tax bills in Arizona are sent out in September for the current year – for example the September 1999 tax bill covers taxes for the 1999 calendar year.

The valuation of your property on which these taxes are based was established the previous January – January 1, 2008 in this example. The appeal period for these values ended in December 2008.

So, unfortunately, once you get the actual tax bill it’s too late to do anything about it, except under a few special circumstances, including an error that the assessor may have made, newly purchased property, or other change in ownership. Call us with your facts to check it out.

However, you still have an opportunity to appeal the values for the up-coming year.

The assessor is required to value each property at “fair market value”. The “best” indicator of market value is what a willing buyer pays for a piece of property. In California the assessor is supposed to automatically adjust the valuation of a property to the new purchase price.

In Arizona there is no such requirement, and typically the assessor does not change the value to the actual purchase price (either up or down), but uses various computer models to establish his opinion of value once a year. So, unlike California, your taxes will not “jump” to reflect the actual purchase price.

There is also a lag time between when a purchase occurs and when the assessor sets a new value.

Values are set every January for the following year. January 2009 for 2010 taxes. So if you buy property during 2009 the next valuation date is January 2010, for 2011 taxes.

So taxes would not increase based on your purchase, until 2011 (unless there were new construction).

Actually each property has two “values”. Full Cash Value (FCV – Market Value) and Limited Property Value (LPV) which is an arithmetic calculation. LPV can never be more than FCV, but often is less. It moves up on a formula, and is designed to avoid “sticker shock” when the FCV is increased.

Each value (FCV & LPV) has it’s own tax rate associated with it. The LPV typically carries about 2/3 of the tax burden.

This complicated explanation is made to point out that if you buy property for, say, 50% more than the assessor’s value, the taxes may eventually go up a proportionate amount (50%), but that will only happen over a several year period because it will take the assessor a while to discover the actual transaction, and then the taxes will move up slowly as the Limited Property Value increases from year to year. Our brilliant computer is programmed to make the calculations on a year by year basis if you want to know what the future holds.

Each case is unique, because of the timing of the acquisition, the type of property, and the method that the assessor uses to set the values and his or her workload.

If you have a residence and you want to appeal, feel free to click here.

If you have a question that wasn't answered here, feel free to contact us.