How to Appeal Property Taxes on Investment Properties

Property taxes can significantly reduce your investment property’s ROI, especially if you invest in states with high property tax rates (like New Jersey, Illinois, and Connecticut) or states in which property taxes are higher to offset the lack of state income tax (like Texas, New Hampshire, and Alaska).

Unfortunately, many property owners are overtaxed because of flaws in the property tax assessment system. Some experts estimate that as much as 60% of taxable property in the United States is over-assessed, resulting in unfairly high property tax bills. Luckily, there are appeal procedures in place to help property owners correct their overassessments and reduce their property tax bills to fair figures.

This article will explain the basics of how property taxes work and how to appeal property taxes on investment properties to avoid overtaxation and retain higher returns.

Property taxes are recurring taxes levied on property owners (typically annually) primarily to fund state and local services (infrastructure, education, police, fire, etc.). A large share of most tax bills is ad valorem, meaning that it is based on the value of the property. Therefore, if property values increase, property taxes due increase. 

However, the system for determining the property’s value for tax purposes, known as the assessed value, is flawed. Rather than valuing each property annually to determine an accurate assessed value (which would be cost-prohibitive in most counties due to the sheer number of properties), county assessors typically apply a growth index to a wide geographic area. For example, if the consumer price index has increased by 1.5% over the last year, a county assessor may increase assessed values for all properties in their county by 1.5%.

Naturally, some properties will have increased by less than 1.5% during that period, so the property is not worth as much as the tax assessor claims, and the owner may be paying too much in property taxes. 

The goal of appealing property taxes is not to avoid paying your fair share. It’s simply to make sure that you’re not being unfairly overtaxed. 

Before discussing how to appeal property taxes on investment properties, it’s important to understand that the process of assessing values (and appealing them) varies by location. Property taxes are most often levied at the county level, although some states charge municipalities or townships with this task. Additionally, many states have a Board of Equalization (or similar) to standardize property tax policies state-wide, even if local governments are managing operations.

For example, in California, the CA State Board of Equalization is responsible for property tax oversight and state-wide property tax law enforcement (such as Prop 13, which limits property tax increases to 2% per year, maximum). However, the administrative process of levying and collecting property taxes is done by the county tax assessor and tax collector.

Because of differences in state and local tax law, the specifics of appealing property taxes vary from one area to the next. However, the general process is largely the same nationwide.      

Here is a simple five-step process you can use to appeal the property taxes on your investment properties:

Each states offer an “appeal window” during which property owners can appeal their assessed values. 

In California, for example, values are generally published in July, with appeal deadlines of either September 15 or November 30, depending on the county. In Texas, property owners have until May 15 or 30 days from the value notice delivery date, whichever is later. 

Appeal deadlines should be printed on your annual assessed value notice and/or annual tax bill. You can also search online for “Property tax appeal deadline in [your county]” to get an idea of the timeframe.

When you receive a notice of the new assessed value for one of your properties (which could come as an advanced notice or may just be presented on your tax bill), you need to decide if the new value is fair. 

Some states limit annual assessment increases, so it is entirely possible to see an assessed value that is recognizably lower than the property's current value. This is by design to avoid unreasonable increases in property taxes. If this is the case, your assessment is fair, and there is no need to appeal.

However, if the assessed value seems higher than your property’s current value, it’s worth investing more time in confirming the actual fair market value of your property. Importantly, you need to know the value of your property as of the lien date, the date the county is using for valuation purposes. For example, if the lien date is January 1 of the current year (as is the case in many states), you need to estimate the value of your property as of January 1, ignoring how the value may have changed since then.

If you happen to have an appraisal dated near the lien date, this may serve as proof of value during that period. If not, you can draft your own informal valuation (if you have experience in property valuation) or contact a real estate agent or broker to request a CMA (comparative market analysis) or BOV (broker’s opinion of value). Agents often offer CMAs free of charge for single-family residential properties and small multi-family properties of four units or fewer in the hopes of earning your business for future acquisitions and sales. BOVs are more formal than CMAs, but less formal than appraisals. A broker might charge a few hundred dollars for an opinion of value on a multi-family property.          

If you believe the assessed value is higher than the property’s actual value as of the lien date, consider filing an assessment appeal (also known as a protest in some states). This application can typically be found online. Simply search for “property tax appeal application form [your county].” If you cannot find the application online, you can contact your local tax assessor, tax collector, or tax appeals board to request an application.  

There may be a fee for filing an appeal application. While any fees are typically nominal compared to potential tax savings, it’s worth considering before filing. 

Property owners have the right to appeal taxes on their own, but there are also property tax consultants you can hire if you’d prefer to have a professional handle the appeal.

Important: You are still responsible for paying your property taxes as scheduled, even if you appeal the assessment. If your appeal is successful, you will be entitled to a refund (typically plus interest) of any overpayment.   

You (or your hired property tax consultant) typically begin with an informal negotiation with a representative from the tax assessor’s office. You explain why you feel the value should be lower, and they may ask questions or explain why they disagree. County representatives are typically open to hearing your case because their goal is usually to make sure taxes are fair rather than to overtax.

If you cannot come to an agreement with the assessor’s representative, you might be asked to attend a more formal hearing (in person or virtually) in which you and the assessor’s representative each present your case to a hearing officer or appeals board. The hearing officer or appeals board will determine the taxable value based on the information presented.

It’s worth noting that this step can take several weeks or even months, depending on your county’s queue. Be prepared for a bit of wait time between filing your appeal and presenting your case.    

If the county agrees to reduce your assessed value, you should get paperwork outlining the corrected value, followed by either a refund of overpayment or a corrected tax bill with a reduced balance due.

Depending on the size and case load of your county, it can take weeks or months for the correction to be processed. Consider following up monthly until you have received the financial benefit from your successful property tax appeal.   

Not necessarily. Property assessments are updated regularly, so future assessed values may still rise. It’s important to review each new assessment and appeal again if necessary.

You can often request a further review or appeal to a state-level board (such as a Board of Equalization) if available in your state. Otherwise, you may need to wait until the next appeal window to try again.

You risk losing some time and any application fee if the appeal is denied. There is also a very small chance that an appeal could actually increase your taxes due, but this can only occur if the appeal uncovers information about the property showing that the value is worth more than the assessment (within the boundaries of any legal caps on increases).