After months, maybe years, of planning, raising capital, obtaining permits and waiting out construction, your gleaming new building is open and occupied. Soon, you’ll get a simple, one-page letter from your county’s Tax Assessment Office. What should you do if that letter indicates that your property is worth about a half-million dollars more than your appraisal reflects? Every Pennsylvania property owner is entitled to an annual appeal of their property assessment through the real estate tax assessment appeal process. Knowing the value of your property, your tax liability and whether you can reduce your tax burden through an appeal is as critical as managing any other area of your financial portfolio.
Calculating your Property Tax and Fair Market Value (FMV)
In Pennsylvania, real property typically incurs school, city/township and county taxes. Each of the three taxes is assigned a millage rate, which is used to calculate the property’s tax liability. To calculate the total real estate tax owed, the total millage of all of the taxing authorities is multiplied by the property’s assessed value. It is important to note that tax assessment appeals only challenge the assessed value of your property, NOT the imposed millage rate. Millage rates are published on each county’s website.
In addition to understanding your property tax liability, you should also know your property’s FMV. This is the most important component for determining whether to appeal a tax assessment, as it requires you to compare the value of your property to other properties that are similarly sized and used. To calculate your FMV, multiply your assessed value by the Common Level Ratio (CLR). The CLR is determined annually by the PA State Tax Equalization Board and is an average ratio of assessments and sale prices in that county.
We recommend that you engage a licensed real estate appraiser to appraise your property. The appraisal will typically set forth an array of comparably sold properties, contemporaneous photos and measurements, all of which you should use to determine whether your property was over-assessed. The appraiser will also determine a median property value, considering both real and potential income of the property and the cost to build a similar building. If you decide to appeal your assessment, you should request that the appraiser attend your hearing to answer any appraisal-related questions.
The Board of Assessment Appeals
A county-based Board of Assessment Appeals hears appeals. Each county’s Board has its own rules, regulations and procedures, and you should familiarize yourself with the rules prior to your hearing. The rules as well as the assessment appeal forms are typically available on the county’s website. The decision of the Board is generally rendered at the conclusion of the hearing or, in more complicated cases, within a matter of weeks. If you are dissatisfied with the outcome of your hearing, you may appeal the Board’s decision to the county Court of Common Pleas. For this appeal, parties are strongly advised to engage an attorney familiar with the required procedures.
While it may seem complicated, the real estate tax assessment appeals process is relatively simple and a great way to take control of your tax liability going forward. A successful appeal can save you money for years to come.
Michael L. Solomon is Senior Counsel in the Cohen Seglias Harrisburg office, and is a sitting appointee of the Dauphin County Board of Assessment Appeals. Michael concentrates his practice in the areas of real estate, administrative law, creditors’ rights, commercial transactions and corporate finance.