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Chapter 18 - Taxes and Assessments
At the completion of this chapter, students will be able to do the following:
1) Explain the purpose of taxation.
2) Explain how tax rates are used to calculate a homeowner’s property taxes.
18.1 The Purpose of Taxation
No one likes to talk taxes, but they are a big component of life. From a real estate perspective, they are also one of the most common questions your clients will ask. “What are the property taxes?” “What am I paying for with these taxes?” Let’s break down some basics to get started.
Over the next few lessons, we’ll cover the most important aspects of property taxes. This includes why we pay taxes, what assessed values are, and how property taxes are calculated. It’s also going to be important for you to understand protesting assessments – when a property owner doesn’t agree with taxes, along with special assessment taxes and tax liens.
Each of these areas relates directly back to your business. You’ll need to understand taxes on all aspects of property to be able to educate your would-be buyer. Let’s break this down, then.
What Are Property Taxes, Then?
Local governments apply property taxes on real estate. The property owner must pay those taxes or, if he or she fails to do so, the government can levy fines, liens, or even force the sale of the property to recoup the losses. Generally speaking, property taxes are always based on the value of the property. This includes the structure as well as the land it sits own.
So, How Are Property Taxes Calculated?
Local governments calculate property tax rates based on laws in the region. Property taxes are dependent on county-based laws in the state. For example, the tax rate in one county can be significantly different than that in another. How much is charged to each property owner is specific to the laws within that state.
Because these taxes are so individualized between counties, it’s hard to pinpoint how much any given homeowner will pay. Not only is the location a factor, but there’s also a consideration of value.
The more valuable the home is, the more taxes the property owner pays on it. Most county tax laws specifically state how much is levied on the property per $1,000 worth of value.
A tax rate is set through the laws within the community. This is then multiplied by the assessed value of the property. This tax rate is refigured each year, based on the budget needs of the community.
Property taxes are levied on only real property in most states. This includes the land itself as well as the structured and fixed buildings on it. It does not take into account any personal property owned or maintained at the property.
What’s the Purpose of Property Taxes?
Why do we collect these taxes in the first place? It’s simple – without taxes on property like this, there would be a limited amount of money to use to maintain the city or county.
As we noted earlier, the counties create tax rates based on laws within those communities. In some areas, what property taxes pay for will differ compared to other regions.
Most often, though, property taxes pay for the most important infrastructure needs within a community. This includes providing for the maintenance of water and sewer lines. It may include roadways. In most cases, it includes fire services as well as law enforcement. Though cities may also fund these organizations through separate taxes, most of this money pays for the community’s needs.
This can also include public servants. Education often relies on these funds as well.
It can also include any construction within the city done for the community, such as the building or management of parks.
In our communities, property taxes are the most important source of revenue of local governments as well as schools. They also pay for all other municipal services. When your client asks you about the benefit of paying property taxes, discuss just how valuable these funds are to their safety and quality of life.
Who Can Require Property Taxes?
State and county laws establish property taxes. They can also be levied in emergency situations if state laws allow for it. Most property taxes are a combined figure that represents city taxes, county taxes, and local school district funding.
A specific homeowner must contribute to all applicable property taxes based on the location of his or her home. For example, if the home sits in a specific school district, the property owner will pay taxes for that school district, even if he or she doesn’t have a child in school. Most commonly, taxes are specific to the parcel of land, not to the homeowner’s use of that property.
From a property buyer’s point of view, all property taxes should be clearly communicated within the transaction. This information is provided in a listing but needs to be verified before the sale.
Are All Properties Taxed? Or, What Properties Are Commonly Taxed Like This?
State and county laws determine property types. In most states, property taxes apply to most real estate in the community. This includes all residential property including farms and undeveloped areas that are owned by citizens. It also applies to most commercial property, including your retail establishments, industrial buildings, and office spaces. Any type of income-earning property is going to have a property tax associated with it.
What Properties Are Generally Exempt from Paying Property Tax?
There are some types of property exempt from property tax in most states. The rules for this change in some communities. However, most often, it is the property that isn’t for-profit or otherwise privately owned. For example, there is no benefit to taxing government or city-owned property such as the courthouse or administration buildings. There is also no benefit to taxing educational buildings in the community. However, if the educational institution is a for-profit organization or one operating out of a leased space, that space can still be taxed.
Most of the time, nonprofit organizations and charitable organizations also do not pay property tax. Religious organizations do not pay property tax on their real estate either. To qualify for this type of exemption, most counties and cities require the property owners to file for a nonprofit or religious status.
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18.2 Assessed Values
When considering property taxes, the question is nearly always the same. How much are they? However, people often wonder why one home has to pay more than another. This comes down to something called assessed values. Understanding this is critical to knowing what to expect when comparing homes across different areas within the same city or county.
What is the value of the property?
Legally, most properties are taxed as “ad valorem tax.” That is a Latin word for “according to value.” More specifically, it means the amount of tax paid is directly related to the value of the property. The higher the value, the more taxes apply to that property.
Here’s an area of confusion. This isn’t the same as the value of the property the home sells for on the open market. Rather, it is based on what the county (or other taxing authority) believes the value of the property is. Most commonly, the county auditor assesses the value of the property for tax purposes. Determining this value doesn’t necessarily take into account how much the property could sell for, though.
When does the county assess the value of the property? This can change from area to area. In nearly all situations, though, the taxing authority will determine the value of the property one time every year. It is generally done prior to the property taxes being levied on the home or other property. It can change more frequently if necessary, though this is uncommon. It doesn't necessarily change when property changes hands between buyer and seller.
Who is making these decisions?
You may hear a bit more about this when a person is facing an increase in their property taxes. They want to know who is making the decisions about what their home’s assessed value is. This is done by a tax assessor.
This tax assessor is a government official. In some areas, he or she is appointed to the position. In others, the person is voted into the position. In all cases, their sole job is to determine the assessed value of real property within their area.
The assessor must consider things like the overall availability of land, the size, and features of the property, and how much the value of homes within the community as a whole has increased.
How are properties assessed, then?
The tax assessor has three main ways to assess a property. All assessors set out to create a fair determination of the value of the property for the given tax year. Here’s how it can play out.
The first method is a sales comparison method. It is perhaps the most commonly used method. In this case, the tax assessor will compare the value of the current property to other properties in the immediate area. He or she is looking for a close match to other properties within the same community – usually as close to the home’s size and location as possible. This provides insight into how much this home is worth by comparison.
A second way to assess value is called the cost method. The tax assessor is looking at the cost to reproduce the home. If you wanted to build this very home right here right now, how much would it cost to do so? The tax assessor has to consider a variety of factors in this calculation. That includes the current cost of materials and the cost of labor to do the work. Of course, a brand new home is going to be valued at a higher price point than the existing home. For this reason, the cost method also factors in a percentage of depreciation. All of this combined determines the value of the house itself. Then, the tax assessor has to add in the value of the land the house sits on to come to the final value. It sounds complex, but formulas exist to help tax assessors to be rather accurate here.
A third method is the income method. If the property in question is an income-producing property, it falls under this method. Because income-earning properties earn money for the property owner, this must be taken into consideration. This includes all types of properties such as rental properties, commercial retail spaces, or other buildings. This method is dependent specifically on how much income the property is likely to make for another owner.
Talking to the buyer about assessed values is important. It’s easy to get this information confused with how much the home is selling for on the open market. It’s important to tell buyers that assessed value generally does not impact how much a home will sell for to the buyer. It is not uncommon for buyers to see the assessed value as what the home is worth. These factors are significantly different, and it is your job, as a real estate agent, to explain that difference.
How does fair market value, then, play a role in the value of assessments?
As noted, the assessed value of a home is not always the same as the fair market value. The fair market value is the value the home would sell for on the open market. Generally speaking, you can expect the assessed value to be less than the fair market value. In some markets, this may not be the case. Because fair market values can change so rapidly based on real estate market conditions, assessed values are calculated independently of this information.
However, some locations will set the assessed value of a property based partially on the fair market value. For example, some jurisdictions will assign the property an assessed value based on a percentage of the fair market value.
Here’s an example of how this might work. Let’s say the area assigns an assessed value as being set at 40 percent of the current fair market value of the home. A property in this market has a fair market value of $420,000 right now. Do the calculations to determine the assessed value. $420,000 times 40 percent, or 0.40 equals $168,000. As noted, that’s a significantly less value than what the home would sell for on the open market.
In a situation like this, where the assessed value is set as a percent of the fair market value, it is likely that a tax rate may be positioned a bit higher. It’s important to remember that the ultimate goal of property taxes is to pay for the needs of the community. In some situations, then, the tax rate may be at a higher rate. The goal is to meet the jurisdiction’s budget requirements. In the next lesson, we’ll discuss more on tax rates and how they are set.
For now, recognize that assessed value is the starting point for determining property taxes. Which method the community uses depends on various factors, but the determination is set by the local government and rules.
18.3 Tax Rates / Calculating Property Taxes
In this lesson, we will go over tax rates and how they are used to calculate how much a homeowner must pay in annual property taxes. This is an important topic because the tax rate a homeowner is subject to is directly related to how much they will pay in property taxes.
First, consider what a tax rate is.
As we talked about in the previous lessons in this chapter, every community needs money to pay for various services, such as roads, schools, infrastructure, etc.. Each year, a community needs to reassess their budget to ensure they have enough money to pay for these services. To do this, the taxing jurisdiction will come up with a tax rate, which applies to each property.
First, the community’s annual budget must be determined.
Next, the total assessed value of all properties in the community must be determined.
Then, a tax rate (also known as a millage rate) must be determined, which would allow the community to collect enough money in taxes to cover their budget needs.
In other words, the tax rate is equal to the total amount in tax dollars collected divided by the total taxable assessed value of the properties in the community.
Let’s go over a quick example to see how this all works.
A city determines that they need an annual budget of $5,000,000 to pay for all its services.
The city expects to collect 80% of their budget needs from property taxes.
This means the city will collect $4,000,000 (or $5,000,000 x 0.80) from property taxes.
If the local assessor determines that the total assessed value of all taxable properties in the city equals $200,000,000, what tax rate must the city apply to raise the $4,000,000 they need for their budget?
To find the answer, we have to use the following formula:
Tax Rate = Amount needed in collected taxes [divided by] total assessed value
This means, the tax rate will equal $4,000,000 / $200,000,000, or 2%.
Now, most communities will express their tax rate as a millage rate or “per mill”.
“Per mill” simply means that it applies the tax rate per $1,000 worth of assessed value of the property. This way, a property that is valued at $1,000,000 is not paying the same as a property worth $100,000. The higher the value of the property, the more that property should pay.
In short, 10 mill equals 1 percent of the property’s value.
Here is an example. Let’s say a home in the community is assessed at $425,000. Remember, this is assessed by the taxing authority. It is not necessarily based on the actual value of the property if it was sold on the real estate market to the public.
Let’s say the property is subject to a county tax rate of 25 mills. Doing the math, how much is owed in property taxes here?
To determine the tax cost to the property owner here, do the following. 25 mills equals 2.5 percent. Calculating 2.5 percent of the $425,000 value should give you $10,625. This means that the property owner would need to pay $10,625 in annual taxes on his or her property.
Here is another way to calculate this figure. 1 mill is the same as 1/1000.
If you wanted to determine the rate of taxes on a property this way, you would do the following. Let’s assume the property’s assessed value is $560,000. The property is subject to a tax of 1.5 mills.
In this case, you would take $560,000 and divide that by 1,000. That gives you $560. From here, you then need to multiply $560 by the mills required to be paid, which means you would multiply $560 by 1.5. This gives you an annual property tax of $1,120.
Next, you have to consider that most homeowners have to pay property taxes on more than one tax rate. For example, they may have a tax rate for the city and an additional tax rate for the county they live in. The tax rate for the property, then, is a combination of all of these factors. You need to add up all associated tax rates for that property. This may include the school district, city, county, and any other tax within the community.
That can significantly increase your taxes, of course.
Let’s do one more example to show how this might work. Let’s say a property has an assessed value of $325,000. This property is in several taxing jurisdictions, each of which has the right to apply a tax rate to that property. The property is subject to a 15 mills county tax. It also has a city tax equal to 1 mill. Finally, there is a local school tax of 12.5 mills.
Now, how much is owed by this property owner to all taxing jurisdictions?
Your first step is to add up all three of the tax rates. In this case, you need to add 15, 1, and 12.5. This equals a total of 28.5 mills.
Next, convert those mills into a percentage. Take 28.5 mills divide by 1,000 and and you will get 2.85 percent.
With this, you can do the math to come up with the total.
To get the final answer, you need to multiply the property’s value of $325,000 by the percentage, which is 0.0285. This gives you $9,262.50 owed in annual taxes.
Understanding the tax rate and how the math works is important. Buyers need to understand the various property tax rates they will be subject to, in addition to the overall tax bill they will pay each year.
18.4 Protesting Assessments
Accuracy is critical when it comes to property value. It also matters when determining the amount of taxes owed. As you work with property buyers, many will ask a simple question. “Are these taxes accurate?”
The assessed value of a property is directly related to the amount of taxes the property owner will pay on the home. However, there can be some discrepancies here in terms of what that value should be. In some cases, assessing property value can seem like a subjective thing. Someone must put a dollar value on it, though. If the assessed value is not correct, the homeowner could be paying higher taxes than he or she should pay. No one wants that to happen, but it can occur in various situations.
The question is, then, what can cause a property’s assessed value to be off in some way? Most people would never complain if the assessed value was too low. That could end up saving them some money in the long term, of course. However, many people will question the value of a property if they believe it is too high.
Imagine, for example, a home listed on the market for the first time in 15 years. The home’s assessed value is based on the area’s previous value. Over the last few years, there’s been a decrease in population, far fewer trees, and more pollution. This can change the value of the home. It may be significantly less now. While most properties are assessed on a yearly basis, most often no one visits the property in person each year to verify its value. This could allow something like this to occur.
Another example may be the actual condition of the home. Even if someone came to the property to assess the value, the interior isn’t accessible in most cases. The interior of the home may have foundation damage or be very outdated. This in itself can change the value of the home.
It’s less likely things like the physical location of the property (which jurisdiction it is in) can play a role. But there are circumstances in which the community changes, the home itself changes, and its overall value is no longer what is perceived.
The assessed value can be wrong. When it is, the owner can challenge the assessment.
Challenging an assessment is not unheard of and in some areas happens often. In short, a property owner completes a document explaining why the home’s assessed value for property taxes is not accurate.
Here’s the key, though. The taxing authority isn’t going to simply go by what the property owner says. To invest time and money into changing the assessment, the agency wants to see real, accurate information to back up any claim.
Property owners are most likely to gain access to this information if they hire a licensed appraiser. This should be a third-party appraiser, one that does not personally know the property owner or others involved in the transaction. The appraiser’s job is to determine the value of the home based on all the available data. This includes an interior inspection. It is likely to include a full assessment of the local real estate market within the home’s neighborhood. Local changes to the area also can impact the value.
The appraiser gathers this type of information and then determines the value of the property. Documentation to support an assessment challenge like this can help to show the taxing authority the real worth of the property. Keep in mind that this figure is never going to be exactly the same for the home across numerous appraisers. The taxing authority, then, needs to use the facts and data to make its own assessment.
Let’s say a homeowner wants to challenge an assessment. He or she should gather evidence to support their claim of why the value isn’t accurate. This may mean paying out-of-pocket for an appraiser to come to the home and provide a full appraisal. From there, this information is submitted to the taxing authority. That taxing authority verifies the information and makes a decision.
It sounds simple, right? It rarely is.
A challenge like this can take some time. However, it’s a legal right most community residents have. And, because it plays such an important role in determining how much the property owner needs to pay in taxes, it’s important not to rush decisions.
Should a property owner challenge their assessed value?
Most of the time, property owners will receive a notification in the mail that alerts them to their new assessed home value. This is done by the taxing authority. This is generally the jumping off point for many property owners. With this letter in hand, they may decide to challenge the assessed value. That letter should also provide information on how to contact the agency to appeal the decision.
However, ever jurisdiction sets its own specific process for appeals. You may need to complete documentation and send it in. In other cases, a full inspection and appraisal is done by the taxing authority. In still other areas, the process may warrant just a phone call to explain your case.
It’s important for the property owner to follow the specific directions provided to them in all cases. If they are not included on the letter alerting them there is a new assessed value – or there is no letter available – it’s important to visit the taxing authority or call them to inquire about the appeals process.
Most of the time, when annual assessments are created, there is a set process and time limit for requesting an appeal. For example, some taxing jurisdictions may provide a time period of 60 days from receiving the notice for the property owner to respond.
Organizations may also have a time period they set aside each year to hear such protests. This is common in smaller areas where the taxing authority doesn’t have the manpower to handle these types of matters quickly.
In all cases, if the property owner feels he or she is overpaying due to an inaccurate assessed value, he or she should take action. This value will only increase year-over-year based on inflation and other factors. Getting it under control now is important.
18.5 Special Assessment Tax / Tax Liens
A special assessment is a type of extra tax. When it comes to property taxes, we’ve already mentioned the importance of tax rates and how they are assessed. A special assessment tax goes above and beyond those requirements.
There are various reasons why a special assessment tax may be levied on a property. Most commonly, they are designed to meet a specific funding goal. Various projects may warrant this.
For example, it is common for a specific infrastructure project to require an added tax to be completed. Consider a community that needs to widen a road and cannot get enough state funding to help. They may turn to a special assessment tax – one that is above and beyond the current infrastructure taxes in place – to pay for that specific need.
What makes these taxes a bit different is that they can only be charged to those property owners that are located within the designated special assessment district. Here’s an example of how this may impact the tax. A small community may see a significant number of people leave over a period of time. They do not have the funding to meet community goals. They impose a special assessment tax to help cover those added costs. However, individuals in surrounding communities do not need to pay for these costs. Just those within the specific area.
There are other reasons and benefits to using a special assessment tax. In some regions, a city may want to encourage new residents. Yet, the development of a new subdivision is costly and can be hard for a community to manage on its own. In this situation, the city may create a special assessment tax to those who move within the new subdivision. This tax may help to fund the building of new sewer lines and roads within that area.
These added taxes are not just for infrastructure. They can be created for most needs that benefit the community. A city may use them to develop new programs or to build a public recreation center. They may be used to build a park or even a school in some cases.
Any special assessment tax like this must be fully made available to those buying a home within the jurisdiction. Information on any taxes should be a component of the local county assessor’s records.
One other key aspect of these assessments has to do with deductions. Many types of property taxes are a deduction on taxes. The property owner may be able to reduce his or her income tax payment by paying his or her taxes. However, special assessment taxes generally are not deductible in this manner. The reasoning behind this may not always be easy for a home buyer to understand. While property taxes, in general, are designed to meet the good of the greater community, special assessment taxes only benefit a smaller portion of the population. Therefore, they typically are not tax deductions.
Another component of taxation of property is the tax lien. There’s often quite a bit of confusion of tax liens. Yet, they can be a key factor in the sale of real estate.
So, what are they? When a tax lien is present on a parcel of property, that indicates the responsible party has not paid his or her property taxes. Tax liens can be added for nonpayment of both standard property taxes and special assessment taxes if they are not paid.
Most of the time, the taxing authority will file a tax lien on a property when the owner has failed to make payment within the given time. This isn’t a simple manner and generally requires court approval. As a result, most of the time this isn’t added to the property until the individual is significantly late on his or her taxes.
When this occurs, the taxing authority recognizes the late payment, sends numerous letters, and likely has received court approval to impose the tax lien on the property. The property owner – or other responsible party – has to make payment at that time on the taxes. If he or she fails to do so, the taxing authority can then take legal action against the property owner.
Most of the time, that legal action is the force of sale. If a property owner fails to make payment on his taxes, he or she may see the taxing authority force the sale of the property. This is done through the foreclosure process.
It’s important to know that the foreclosure process can be started by the mortgage lender as well as the taxing authority. If a person is making his or her mortgage payments but doesn’t pay taxes on the property, that can trigger a tax lien and the eventual foreclosure on the home. It’s not always about nonpayment of mortgage payments.
Tax liens can be difficult to manage if a home is being foreclosed upon or is up for sale. Generally speaking, they should be disclosed in the sale. However, in some cases, it is possible for the property buyer to be held responsible for the tax lien on the property if he or she buys the home. In some cases, this is fully understood at the time of the marketing of the home. It can even lead to a discounted price on the home due to the presence of the tax lien.
Yet, as a real estate agent, it becomes critical for you to understand what these taxes are, how they are placed on a parcel of property, and how they impact the sale of real estate within the jurisdiction.
18.6 Property Taxation in Georgia
In the previous lessons in this chapter we reviewed some of the general principles of property taxation. In this lesson, we will review property taxes specifically for the State of Georgia.
Georgia’s property taxes are ad valorem. That means they are based on the value of the property. The state taxes all property, including personal property, unless otherwise exempt under law. Real property is real estate – including the land as well as anything on the land, grown on the land, or otherwise affixed to it. The state defines personal property as anything else a person owns.
Taxes are county-based. It’s taxable by the county in which the property sits. Each property owner receives a bill on January 1 of the year. Returns are due to be paid by April 1st each year. This is done through the county’s tax commissioner’s office or the county tax assessor’s office.
In Georgia, if a person fails to pay his or her taxes on real property, it may be levied on the property and then the county can force the sale of the property.
Also, important is the use of the property. In Georgia, the funds collected from property taxes are used to pay for support services at the local and state government level.
How Georgia Assesses Property Value – Who Determines the Value?
Georgia’s property assessment process aims to have all real property taxes at the value by which the property would be sold at cash value (this does not apply to property sold through an auction or other type of forced sale). It’s required to be assessed at 40 percent of that value.
The Board of Tax Assessors handles the assessments, which are then approved by the State Revenue Commissioner. This organization’s goal is to ensure that property values are fairly accessed across the state.
If the property owner doesn’t feel the assessed value is appropriate for any reason, he or she has the right to appeal the decision. In Georgia, this can be a bit of a long process, but it is all handled by the County Board of Equalization.
There are some types of property that have specific considerations. If a buyer purchases a historic property, or rehabilitated historic property, for example, which is somewhat common in the state, the assessment is a bit different. For historic property that meets the requirements of the Georgia or National Register of Historic Places, a preferential assessment is done on the structure. The assessment is set for nine years during which time it doesn’t change.
Many people purchase rehabbed historic properties. In this case, a preferential assessment is possible if the property’s rehabilitation has increased the market value of the structure by at least 50 percent, if it is an income producing company, the value has increased at least 100 percent, or the property is residential but partially income producing.
Let’s say there is a property that is in a historic district that is purchased, rehabilitated to its former glory, and then opened as a walk-through museum. As long as the work done increases the value by 100 percent in this case, a preferential assessment occurs. And, that means the value is locked in for nine years. That’s usually a significant money saver for the organization.
Landmark historic property is yet another potential preferential assessment. This can occur when the property is certified at the local government level to be of landmark value. For example, it could be a century-old home the city deems is valuable for the history of the community. It also must meet conditions of local ordinances that extend to preferential assessments.
There are other special assessment programs available as well.
This includes agricultural property, conservation use property, environmentally sensitive property, and forest land property. Others include brownfield property and residential transitional property (or property that’s being developed into residential property). In each of these cases, the assessment value is based on specific terms.
For example, in an environmentally sensitive property, the assessment is based on the current value of the property – not the fair market value when the property is maintained, improved, and meets the goals of the Department of Natural Resources.
Consider farm land.
For preferential agricultural property, which is readily sold often in Georgia, there’s a different taxing process. If the agricultural property is determined to be a bona fide property, such as a working farm, it can be assessed at 75 percent of the typical assessment of a property. For example, as noted, residential real estate is assessed at 40 percent of the fair market value or the amount someone would pay if they bought the property on the open market. Farm land that fits this qualification is assessed at just 30 percent of the fair market value (or 75 percent of 40 percent).
Other types of assessments are based on the land use as well. For example, timber is not taxed until it is sold or harvested and then the tax is based on 100 percent of the value of the timber at that time. Equipment, machinery, and fixtures are assessed at 40 percent of their fair market value with several limitations and restrictions based on the original cost of the property, depreciation, and inflation.
Considering all of that, how about the tax rate?
The tax rate in Georgia is set each year by each county. Several organizations can establish the tax rate here. This includes the Board of County Commissioners, which handles most taxing. It can also be done by other governing authorities within the taxing jurisdiction. That can include local governments. The Board of Education also has the ability to set tax rates.
The tax rate is fairly straightforward. A one mill tax rate is equal to one dollar per $1,000 of assessed value.
In Georgia, the average millage rate at the county and municipal level is 30 mills. This doesn’t mean all locations have this – and it is very important to verify the mill rate of the property independently when you need this information.
One change over the most recent years is the phasing out of the state mill rate on personal and real property which has long been in place. Effective January 1, 2016, there is no longer a state levy for property taxes.
At the city level, municipalities are able to assess their own property taxes. This is done based on the county-assessed value of the property. In other words, the county assessor sets the value of the property. Then, the city establishes its own law for the tax rate. The city then collects the rate at the value the county has set.
Here’s a quick example. Let’s say the county commissioner determines the fair market value of a home is $100,000. At 40 percent of the fair market value, the assessed value is then $40,000. From there, the millage for that property is determined. Let’s say the property is impacted by 25 mills. We will then divide the $40,000 by 1000 and then multiply by 25. So the taxes paid are $1,000.
18.7 When Are Property Taxes Due in Georgia?
In Georgia, property owners for both real estate and personal belongings may have taxes levied against them. We’ve covered when and how this type of property is taxed. Now, let’s consider the timeframe for filing the taxes owed.
The taxes are due to be filed in the county with which the property is located. The taxes are due on January 1st for that year. They are paid in advance, not for the previous year. The county also requires property tax returns to be filed between January 1st and April 1st of that year.
There are some specifications associated with filing these returns. Here are a few things to keep in mind.
Residents in Georgia need to file their return for any real property within the county the property is located in. When it comes to personal property, residents that need to pay taxes on it must file and pay for those taxes in the county where they live.
Some types of property have specific requirements. For example, boats that are located in a county other than where the property owner lives require the owner to file the return in the location the boat has been kept for at least 180 days or more out of the year. For airplanes, the property taxes are due in the county where the plane is stored.
What if the property owner is not a resident of Georgia? This can be an important topic where real estate is often purchased as a second home or a vacation property. Nonresidents are still required to file for property taxes, both real property, and personal property. They must do so in the county where the property is located.
Another key aspect of filing a tax return is that it is not always necessary to file a return each year. If the owners file a return or pay taxes on their property the year before and then do not file a return for the current year, they are considered to have filed at the same valuation of the previous year. The same exemptions, if they apply, are maintained for the second year. And, any taxes owed the previous year are to be paid for the current year.
When returns are not paid on time, there is a 10 percent penalty assessed on the property.
Once a property owner determines how much tax is required, he or she is then required to pay those taxes to the tax commissioner in the proper county. The county tax commissioner collects all the taxes from the residents. Then that commissioner distributes them to the city, school, state, or other taxing authorities. Unless otherwise stated by law, property taxes are due to be paid by December 20th. In some counties, the deadline is earlier than this date. Some counties require that taxes be divided into two payments rather than paying one time annually.
Also note, if the property is located in more than one county, the county where the largest portion of the property resides receives the funds.
18.8 Property Tax Exemptions in Georgia
Georgia offers many property tax exemptions. An exemption is a way of reducing or eliminating property taxes on a parcel of land. There are numerous types of exemptions and reasons for them.
Under Georgia law, a homeowner can claim an available exemption, such as the homestead exemption, if they own the property and the land under it. It must have been their legal residence as well. The individual must have met these requirements as of January 1 of the taxable year.
The homestead exemption is the most common one claimed for property.
To qualify for this exemption, the property owner must live in the home itself. It has to be his or her legal residence (as the owner). There are some exceptions to this. For example, if a person is away from his or her home for a period of time due to health reasons, the taxing authority is not going to deny the exemption. However, someone, such as a family member or a friend, has to let the tax commissioner know of this. It cannot be assumed.
To qualify for this exemption, the owner must file an application for it. This is done at the tax commissioner’s office. Some counties have local tax offices that may allow for this application as well. This can be done at any time during the year prior to the tax year. For example, a person must fill out an application by December 31, 2018, to receive the exemption for tax year 2019.
If the homeowner wants to receive the exemption for the current year, he or she must have owned the property on January 1st and have filed an application by the same date that property tax returns are due for the county in which the property is located.
One important note to make sure property owners know is this one – if the property owner fails to apply by the deadline, the property will lose the exemption for that year.
Now, let’s talk about some of the homestead exemptions offered by Georgia.
The standard exemption is the most commonly used one. If an owner qualifies for the exemption, a $2,000 exemption is available that can be applied to the state, county or school taxes owed to cities. This cannot be used to pay off interest on or to pay off bonded indebtedness. The $2,000 is not given as a check – this is not a refund. Rather, it is deducted from the assessed value of the home.
For those who are 65 years and older, an exemption is also available. They can claim the exemption on the home (along with the land under it) and up to 10 acres of land that surround the home. This exemption may cover all state ad valorem taxes.
Additionally, those who are 65 years or older may claim a $4,000 exemption from all state and county ad valorem taxes if their income does not exceed $10,000 for the previous year. Some types of income are excluded including pensions, retirement funds, and disability. Social Security income may not be excluded – the state sets a maximum requirement on this type of income each year.
Another exemption is the exemption for those 62 years of age or older for educational purposes. It applies to those that are residents of each independent school district and each county school district. This exemption is for all ad valorem taxes and can be used to pay off school bond indebtedness. There is an income requirement here as well.
Next, there’s a floating inflation-proof exemption. It’s available to those who are over 62 years old. It applies to state and county taxes but does not apply to taxes to pay for interest or to pay off a bond debt. This exemption is based on the market increases in the property’s value. If the home’s appraised value jumps by $10,000, then the property owner can claim this exemption. The exemption cannot be more than $30,000. There are also income limits on this type of exemption. And, it cannot impact any city or educational taxes.
Disabled veteran and surviving spouse exemptions also exist. An exemption of up to $60,000 plus an additional sum from the payment of taxes for state, county, city, and schools is available to those who are a qualifying disabled veteran. The amount able to be used depends on the current index rate. This is set by the U.S. Department of Veterans Affairs each year. If the property is valued over this amount, the remaining value is then taxed at the appropriate rate. This particular exemption applies to those people who qualify as a surviving spouse as well as any children who are minors after the veteran dies.
There are a couple of additional exemptions to consider. The homestead exemption for a surviving spouse of a U.S. Service member is also available. If the surviving spouse of the Armed Forces who was killed or died as a result of any type of armed conflict or war, that unmarried, surviving spouse can apply for an exemption. The individual can obtain an exemption for all ad valorem taxes for all levels – the state, city, county, and school. The amount of this exemption is $60,000 plus an additional sum. Like with the disabled veteran exemption, the additional sum is determined by the U.S. Secretary of Veterans Affairs.
Finally, you have the homestead exemption for surviving spouses of a police officer or firefighter. If the property owner remains unmarried and has a spouse that died as a result of being in the line of duty as a police officer or a firefighter, they can obtain a homestead exemption. This exemption is worth the full value of the homestead. The only detail here is that the individual must occupy the residence as their home.
18.9 Taxpayer Bill of Rights in Georgia
In Georgia, there are a few key aspects of property tax law that define the rights of the property owner. These fall under Senate Bill 177, Act 431. It’s a law that went into effect in 1999. The law offers some important clarifying factors about taxes in the state.
One area of importance is the prevention it provides for indirect tax increases. Specifically, those indirect tax increases that occur as a result of inflation within a county to the existing property values are prevented.
The law also clarifies the property owner’s right to object and then appeal an increase that is made by the taxing authority based on the proposed value of the property. It sounds a bit confusing, but keep going here.
First, consider the provision of O.C. G.A. 48-5-32.1. This rule was put in place by the Revenue Commissioner. These regulations govern a number of aspects of the tax payer’s rights. These apply specifically to the rollback of millage rates that can occur when the value increases after an assessment of the property. Let’s clarify some of the key points.
As noted, the first is the prevention of indirect tax increases.
Annually, the county tax digest has two specific types of value increases possible. These occur as a result of inflation as well as increases in value due to the improvement of properties or new properties. In situations where the millage rate is rolled back each year to offset any inflation increases – this would be done by the taxing authority. When the taxing authority doesn’t roll back the millage rate, but inflation increases the value of the home, the authority is then required to notify the public that there is an increase in the taxes they have to pay.
For example, the community sees inflation grow in the previous year. If the taxing authority recognizes this and adjusts how much is collected to meet the previous goals of the tax levy, there’s nothing else to do. But, if the taxing authority – which can include a county, school board, or city, or whatever other organization is levying the tax – does not do this, then they must let the public know their taxes are increasing.
Under Georgia law, the total digest of taxable property is prepared with an eye on inflation. The law requires a rollback of the millage rate when inflation occurs. The new figure should produce the same total revenue for the taxing authority, based on what would have been raised had no inflation occurred.
Let’s say the county decides not to roll back the rate. When this happens, they must hold three public hearings. They must issue a press release. And, they must place notices of the increase in the local newspapers. Each of these news reports must provide information on why and how the tax was managed.
Now, the second component of the Georgia taxpayer Bill of Rights focuses on the enhanced taxpayer rights when they appeal property increases.
The law significantly improves the tax payer’s ability to appeal the decision of increased property values from prior years. First, when there is a change, the taxing authority must give an assessment notice to the property owner. It needs to communicate the steps the taxpayer can take to learn more about the value change or to appeal the decision.
When the value grows by more than 15 percent, the taxing authority has to provide even more information including a full breakdown of reasoning.
Then, if a property owner goes through the appeals process because they don’t agree with the new assessed value, the assessor must provide reasons for rejecting the appeal. And, the assessor cannot make additions to these reasons later on if the appeal process continues.
Another important change is who is responsible for proving the value of the property. Like in a criminal case, the burden of proof lies on the shoulders of the government, or in this case, the assessor adjusting the value of the tax payer’s property. They must show by a preponderance of evidence that the change in value is valid. In fact, this responsibility to provide evidence to support their claim must continue through all stages of the appeals process even if the case lands in the hands of the state’s Superior Court.
The law also provides the taxpayer with the ability to change the hearing and Superior Court proceedings times just once, should they need to do so. The law even made it possible for taxpayers to request a time for a hearing that is as early as 8 a.m. or as late as 7 p.m. The goal is to make it possible for residents to be able to manage the process of appeals.
Another key aspect of this Bill of Rights clarifies the court costs and fees associated with the appeal process. The law makes it possible for the property owner to recover these costs, including attorney fees if the property owner’s appeal is validated. More specifically, if the court finds that the value is 85 percent or less of what the board of equalization determines.
The law makes it possible for the property owner to record conversations, too. For example, the property owner can record conversations with the appraiser or the assessing office and use those recordings in the appeals process.
Finally, and this may be something agents should look into to be able to provide for their questioning buyers, the law makes it a requirement for the tax commissioner to provide a full brochure to the public that outlines all of the property tax laws and the procedures for them. It includes information about exemptions and preferential assessment programs, too.
All of this data gives the taxpayer a bit more leverage in controlling their tax assessments.
18.10 Property Tax Appeals in Georgia
In Georgia, property owners are required to file their taxes according to a specific process. And, in some cases, there will be times when the owner doesn’t believe the tax levied is fair to them. Let’s talk about what is supposed to happen in this situation.
First, it’s important to know the rules and procedures for filing property tax returns in Georgia. This is handled at the county level.
Taxpayers are given two ways to file returns. The first option allows the taxpayer to pay their taxes in the prior year, which then makes the value for the previous year the determination of how much tax is owed. The second option is to file one of several tax returns between January 1st through April 1st.
It is the job of the county tax assessor to send out an annual assessment notice to the property owner. This document outlines information on the valuation of the property along with the process for filing an appeal in that county.
Once the tax assessor has sent the notice, the taxpayer then has the right to appeal the decision. They are given 45 days from the date of the Assessment Notice was mailed to file that appeal. It’s possible to file an appeal for reasons related to the property based on the value, taxability of the property, the uniformity of the tax, as well as any denial of an exemption. If this applies to the property owner, he or she must then file a written appeal through the County Board of Tax Assessors.
Let’s say the owner wishes to file an appeal. He or she needs to use the Appeal of Assessment Form PT-311-A. This is provided by the state of Georgia and is the same in every county. It’s quite important that this appeal goes to the right location when mailed. It should not go to the Department of Revenue, which is a common mistake. Rather, it has to go to the County Board of Tax Assessors.
Now, the property owner has to choose between three options for filing the appeal. Here’s a breakdown.
First, there is the possibility of appealing to the County Board of Equalization. It is possible to appeal to this board for things like taxability of the property, uniformity, and value. It is also possible to appeal for exemption denials. The owner appeals, the board reviews it, and then the assessor sends a new notice. If the property owner still doesn’t agree, he or she has another 30 days from receipt of that amended notice to appeal again. This time, the appeal goes to the Board of Equalization, a hearing is held, and that Board makes a decision. If the property owner still does not agree, it is then possible to appeal a final time to the Superior Court.
The second option is to appeal to a hearing officer. This is a state certified general real property or state certified residential property appraiser. This person must also be approved to hold this position by the Georgia Real Estate Commission and the Georgia Real Estate Appraisers Board. This party can address concerns in the value of the property or the uniformity of the value on any non-homestead real property. However, the only time this applies is when the value is at least $1,000,000. If the decision made by a hearing officer isn’t acceptable, the property owner can then submit an appeal to the Superior Court.
The final option is to appeal to an Arbitrator. Within 45 days of receiving the notice of the assessment, the property owner can appeal by specifying he or she wants Arbitration. This is done through the Board of Assessors. That board then notifies the property owner of the receipt of their appeal within 10 days. In this process, the owner has to submit a certified appraisal of the property within 45 days of filing the notice. The board has the ability to accept or reject that appraisal. If it is rejected, the board must then certify the appeal to the County Clerk of the Superior Court for an arbitration hearing.
If this occurs, a judge hears the case within 30 days. The arbitration provides a decision at the end of that time. This is a final decision that cannot be appealed. Now, in this situation, if the Board finds that the assessor’s value of the property was correct, then the taxpayer must pay all fees associated with the case, including costs for the arbitrator. If the process finds that the taxpayer’s value is accurate instead, the county is responsible for these fees.
Now, let’s say in the first two situations the property owner wants to move towards an appeal with the Superior Court. That’s his or her right.
To do so, the individual needs to file a written notice of appeal within 30 days of receiving the notice from the Board of Assessors. Any ad valorem taxes must be paid in an amount that is equal to the last year in which the taxes were determined. In other words, the taxpayer needs to make a payment on taxes at least in the value of the previous taxes paid.
The County Board of Tax Assessors will then certify the notice of appeal and provide a copy of the appeal to those involved. The Superior Court hears the appeal, usually in front of a jury. If the Superior Court rules in favor of the property owner, it is possible for the property owner to recover some of his or her fees such as attorney fees and appeal hearing fees. The decision made by the Superior Court is then considered final.
Chapter 18 - Quiz
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