Why you're probably paying too much in property taxes

When did you buy your house? If it was in the last five years, chances are you're paying too much for property taxes and it might be tough for you to appeal to have them lowered.

(I have to credit CNN for inspiring this post, since they did a report on the issue this morning). The problem is that most municipalities only schedule property tax reassessments every three to five years. What was happening five years ago? You guessed it: we were in the middle of the housing boom. So if you own, your crib is almost certainly worth less than you bought it for, provided you bought in 2007 or before. And if your property hasn't been reassessed by local authorities since you bought it, you're paying taxes on the over-inflated value of the house, not what it's currently worth.

Don't own? Don't think this doesn't affect you. The rent you pay is directly tied to your landlord's cost of ownership, which includes the mortgage and property taxes. That's going to be especially true if you're renting from a private owner and not a large management company.

So what can you do? In most places, there's a formal appeals process you can go through to get your property reassessed. Check with your local authorities for the procedures. They'll have to follow whatever those steps are to re-evaluate how much you pay. But don't expect that to happen quickly, or for your local government to be eager to lower your taxes.

The recession has hit local governments hard, and nearly half their revenues come from property taxes. I live in Shaker Heights, which has Ohio's highest property tax rate and where the city is now asking voters to approve a hike in that tax to support the schools. In short, your appeal could starve them of money right when they need it most. That means make sure you have your ducks in a row before you shoot for that appeal.

Good luck and have a great weekend.

How much property tax is too much?

So, partly inspired by Bobby & Aleks, I'm looking around my neighborhood at homes for sale. It's a great time to buy if you're ready: prices and rates are relatively low, there's an 8,000 property tax credit available from the feds until the end of the year and there remain way more buyers than sellers. Where I live in the Cleveland suburb of Shaker Heights, there are any number houses for sale for under $100,000, which is cheap considering the median price in Shaker is nearly $200 grand and that the neighborhood has excellent public schools and other services (I don't even have to shovel my own snow or take my trash to the curb).

But all those services come with a cost and in Shaker, that cost is high. Property taxes on places that are selling like this, a rehab job selling for less than $35,000, are more than $6,100 a year. If that doesn't sound like much, consider this: a $6,100 a year tax bill would add more than $500 a month to your mortgage; on a house you only paid $35,000 for, that'd be more than double what you paid in principal and interest (assuming a 30-year mortgage at 6.5 percent).

So how much tax is too much? Would you pay exorbitant taxes to move into a great neighborhood with nice schools and services, or would you rather move elsewhere where you might get more house for the money?