[Chat] Ad that came in the mail from "Value Appeal"

Stephen J Gewirtz gewirtz at bellatlantic.net
Thu Dec 1 14:22:34 EST 2011


Judy,

With the homestead tax credit, your tax is always less than it would be 
without the credit.  But your tax does go up, sometimes even when your 
assessment goes down.  Let me try to explain with an example using 
simple, small numbers.

Suppose that in 2007, an owner occupied principal residence was assessed 
for $1000 and with a tax rate of 2%, the tax was $20 (actually, the City 
tax rate is a bit more than 2%, but I am trying to use very simple 
numbers here).  Then, in 2008 when assessments went way up, the property 
was reassessed for $2500.  Since the increase of $1500 is phased in over 
3 years, the assessments and tax (without the homestead tax credit) for 
each year are:
2007  Assessment $1000  tax $20.
2008  Assessment $1500  tax $30.
2009  Assessment $2000  tax $40.
2010  Assessment $2500  tax $50.

And let us suppose that the assessment in 2011 was reduced to $2000 
(when most of us got reductions in our assessments).  A reduction in 
assessment takes effect immediately, i.e. it is not phased in.  Now, we have
2011  Assessment $2000  tax $40.
2012  Assessment $2000  tax $40.
2013  Assessment $2000  tax $40.

Now, let's figure in the homestead tax credit (which shows on your bill 
at "City assessment credit."  Your effective assessment (the assessment 
that your actual tax is based on after the homestead tax credit is 
figured in) goes up a maximum of 4% compounded each year;  So:
2007  Effective assessment $1000  tax $20.00  Homestead tax credit $0.00
2008  Effective assessment $1040  tax $20.80  Homestead tax credit $9.20.
2009  Effective assessment $1082  tax $21.64  Homestead tax credit $18.36.
2010  Effective assessment $1125  tax $22.50  Homestead tax credit $27.50.
2011  Effective assessment $1170  tax $23.40  Homestead tax credit $16.60.
2012  Effective assessment $1217  tax $24.34  Homestead tax credit $15.64.
2013  Effective assessment $1266  tax $25.32  Homestead tax credit $14.68.

Note that I have rounded each assessment to the nearest dollar.

As I hope you can see, your tax goes up 4% each year as long as it stays 
below what your tax would be without the homestead tax credit.  So you 
do benefit from the homestead tax credit.  If you look on your tax bill, 
it will show the tax without the homestead tax credit (which I suspect 
will be quite a bit more than you have ever paid), a city assessment 
credit (the homestead tax credit), and the actual tax that you have to pay.

Let me take another example now to show the situation that people who 
recently bought their houses are in.  Suppose someone paid $2600 for a 
house in 2006.  Based on the sale price, the house was reassessed for 
2007 for a little bit less than the purchase price, say for $2500.  Note 
that for the first tax bill after a property is purchased, there is no 
homestead tax credit.  And let us suppose that when the house was 
reassessed in 2008, the assessment remained at $2500.  Now, there is no 
homestead tax credit because the assessment has not gone up.  And let us 
suppose that the assessment was reduced in 2011 to $2000 (as most of us 
got reductions this year).  Now, the figures look like this:
2007  Assessment $2500  tax $50, no homestead tax credit.
2008  Assessment $2500  tax $50, no homestead tax credit.
2009  Assessment $2500  tax $50, no homestead tax credit.
2010  Assessment $2500  tax $50, no homestead tax credit.
2011  Assessment $2000  tax $40, no homestead tax credit.
2012  Assessment $2000  tax $40, no homestead tax credit.
2013  Assessment $2000  tax $40, no homestead tax credit.

As I think you can see, those who bought houses during the housing 
bubble are paying a lot more in taxes than those of us who bought our 
houses a long time ago.

I hope that my explanation makes sense to you.  The point is that the 
increase in your effective assessment is limited to 4% per year 
compounded even though your actual assessment may be much higher than  
your effective assessment.

BTW, for State tax purposes, the homestead tax credit is such that your 
effective assessment goes up a maximum of 10% per year.  But because the 
State tax rate is much lower than the City tax rate, I have not bothered 
to illustrate the State property tax.  Note that both the City and State 
property taxes are on your annual real estate tax bill.  Also, the CVCBD 
surtax works like the City tax i.e. the effective assessment for CVCBD 
surtax purposes is the same as the effective assessment for City tax 
purposes.

In my own case, the City tax without the homestead tax credit for this 
year was $4050.65, and this was quite a bit lower than last year.  But 
with the homestead tax credit, I actually paid a City tax of 2164.90.  
This was about 4% more than last year.

I am copying our City Council members and the President of CVCA in case 
they wish to use this to explain the homestead tax credit to their 
constituents.

Perhaps it does take a mathematician to try to explain the homestead tax 
credit, but the homestead tax credit does save all of us who have owned 
our homes for a while quite a bit of money.

Steve


On 12/1/2011 11:48 AM, judy berlin wrote:
> I had my taxes go up as a result of the homestead act, How does that 
> work? What is the benefit if any of the homestead tax?
>
> judy
>
>
>
> On 11/30/2011 08:58 PM, Stephen J Gewirtz wrote:
>> I received an ad in the mail today from an outfit called "Value 
>> Appeal."  It shows that my current assessment is $178,600 (the 
>> correct figure) and that if I pay them $99, I should be able to 
>> reduce my assessment to $124,285 based on information they will 
>> supply concerning comparable sales.  Since a house two doors from 
>> mine just sold for $200,000 in September, I find it hard to believe 
>> the claim.  The ad also claims that I can reduce my real estate taxes 
>> by a total of $3690 until the next reassessment (in January, 2014).  
>> Because of the homestead tax credit, I know that that is totally 
>> false.  And I have no idea whether the advertiser is or is not 
>> legitimate.
>>
>> If you have owned your house for a number of years, you probably had 
>> your assessment go way up in January, 2008 and then go down last 
>> January.  But thanks to the homestead tax credit, you probably are 
>> being taxed on nothing close to your assessment.  Five years ago, my 
>> assessment was a little more that $83,000, and thanks to the 
>> homestead tax credit, my effective assessment has gone up by only 4% 
>> per year compounded for City and CVCBD tax purposes and 10% per year 
>> compounded for State tax purposes.  Therefore, I really gain nothing 
>> by lowering my assessment to $124,285 even if the claim that I can do 
>> so is true.
>>
>> On the other hand, if you bought your house just a few years ago and 
>> were reassessed almost immediately based on having paid a high price 
>> during the real estate bubble, you might gain by appealing your 
>> assessment since you are getting little or no benefit from the 
>> homestead tax credit.  At the same time, it is not hard to get 
>> information about comparable sales without paying $99.  According to 
>> the ad, an appeal has to be filed by December 31 (I just looked 
>> online, and the deadline is the first business day after January 1).  
>> You have the right once a year to appeal/protest your assessment.
>>
>> Let me add that CVCBD was told  by the City to expect a further 
>> reduction in assessments when we are reassessed again in January, 
>> 2014.  Nationally, because of the number of foreclosed houses that 
>> have yet to go on the market, prices are still dropping and are 
>> expected to continue to drop.  I have no idea what is happening with 
>> home prices in Charles Village.
>>
>>
>> Steve
>>
>>
>>
>>
>> _______________________________________________
>> Chat mailing list
>> Chat at charlesvillage.info
>> http://charlesvillage.info/mailman/listinfo/chat_charlesvillage.info
>> archive: http://www.mail-archive.com/chat@charlesvillage.info/
>>
>
> _______________________________________________
> Chat mailing list
> Chat at charlesvillage.info
> http://charlesvillage.info/mailman/listinfo/chat_charlesvillage.info
> archive: http://www.mail-archive.com/chat@charlesvillage.info/
>
>






More information about the Chat mailing list