Finance Tax Time

If you purchase a new hybrid car after January 1, 2006, you can get a major tax credit for doing so. Alas, the tax credits applicable for Toyota hybrids are about to be cut in half.

The government uses all types of methodology to modify our behavior. While many look for nefarious conspiracies and such, the government usually does it right before our eyes. The most obvious area of behavior modification is with taxes. In this case, the government has made an effort to boost energy conservation by giving us massive financial incentives to purchase hybrid vehicles. The incentives come in the form of tax credits.

A tax credit is the golden egg of taxes. Whereas a tax deduction, such as the mortgage interest deduction, is used to lower the adjusted gross income you will have to use to figure out the amount you owe off the tax tables, tax credits get right to the heart of the matter. You see, tax credits are deducted dollar for dollar from the amount of tax you owe. If you figure out your adjusted gross income, go to the tax tables and then figure out you owe $8,000 for the year, the tax credit is then subtracted from this amount. Golden egg, indeed.

In the case of hybrids, the government wants to motivate us to buy them, but only to a certain extent. The government is more or less trying to make them an acceptable part of our society, not give them a free ride forever. As a result, the tax credits applicable to the purchase of hybrids phase out after certain sales goals are met. Specifically, the tax credits start being reduced once a manufacture sells 60,000 hybrid vehicles. The IRS reviews the sales number each quarter to keep a tab on how the manufacturers are doing.

In the case of Toyota, the IRS has determined that the company reached the 60,000 mark this last quarter. Specifically, it hit the mark in May. As a result, the tax credit that can be claimed for buying a Toyota hybrid will begin to be phased out. Beginning in October 2006, the tax credit for each model of Toyota and Lexus [owned by Toyota], will be reduced by a whopping 50 percent. In April of 2007, the credits will be cut again, this time to 25 percent of the original credit amount. In October of 2007, the credit will be terminated completely. The tax credit amount is determined by vehicle, so you will have to determine the equivalent cut for the model you are interested in.

If you have been paying attention to the dates, you may have noticed something interesting. The reduction for the Toyota hybrid tax credit does not happen immediately. You can still go out today, purchase a Toyota hybrid and claim the full tax credit. Once we roll into October 2006, that will no longer be the case.

Richard A. Chapo is with BusinessTaxRecovery.com - providing information on tax credits.

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One of the biggest complaints that I hear from homeowner is that their property taxes are too high. In spite of this, most homeowners don’t try to get their taxes reduced.

This is a costly mistake. In high tax states, the taxes on the property can often exceed the mortgage payment. Tax relief is often available to veterans, the elderly and low income homeowners. This relief is statutory and can be achieved by simply submitting the proper paperwork to the town or county you live in. These reductions can be significant depending on the area in which the property is located. These reductions are usually for owner occupied property, not rentals.

The subject of this article is reducing an assessment that the tax assessor has given to your property. There are often errors in the data that the assessor used in arriving at an assessed valuation for your home. The first thing to do is visit your local assessors office and request your property card. This card has the information that the asssessor based his valuation upon. Many of these cards have outdated or incorrect information.

I have seen instances where the assessor valued the property as a two story residence, when in fact it was a ranch or one level home. Since you can’t usually grieve the assessment for past years, it is in your interest to start as soon as possible.

Comparing what the assessor says about the property with the actual home is fairly straight forward. Pay particular attention to such things as the number of bathrooms listed, the square footage of the house, whether or not some areas are unheated and the total valuation that they placed on your property. If you neighbors have recently sold similar houses to yours, use that information to compare the valuation the assessor has used. If he has assessed your property at $400,000 and the last 3 similar houses sold for $300,000, you may have a case for assesment reduction.

The sales data that you need is readily available from almost any real estate agent. If you are courteous and explain what you need and why, most agents will be glad to help you. After all, you may be a future client of theirs.

If you can show that they have made an easily verifiable error,you should seek a meeting with the assessor to see if they will correct the error on their own. Most assessors are very reasonable and would prefer to deal with you informally than go through a formal grievance processs.

In a future article, I will go through the strategies to pursue a successful grievance if the informal meeting with the assessor is not successful.

The author is webmaster at a site that deals with Website promotion and internet promotion and another that provides Mortgage and other loan information.

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Because homeowners who protest their assessments, with a knowledge of how the property tax assessment system works, often recieve $500 to $1000 tax deduction, if not more annually on their property tax bill. Simply stated the property tax bill is calculated by multiplying the homeowner’s assessment times the local property tax rate and subtracting any tax deductions for which the homeowner is eligible.

The property tax doctor can show you how to lower your assessment and thereby reduced your property tax bill! The property tax doctor is a former tax assessor who knows first hand how difficult it is for the average person to penetrate the tax assessor’s bureaucratic jungle comprised of arcane terms and practices. No government document does this for the homeowners.

Just like going to a medical doctor’s office the first thing that you need to do is to gather the necessary information with which to do the paperwork. The primary sources for that information is the homeowner’s property record card obtained at the assessor’s office and comparable home sales. Most homeowners armed with one or both of these information items get their assessment reduced the majority of the time without going beyond their local tax assessor’s office.

Just as you ask your medical doctor informed questions to get some pain relief, so also you must ask your tax assessor (with the help of the property tax doctor) some informed questions in order to win some property tax relief. The best advice the property tax doctor can offer is to go to your local tax assessor’s office and check your property record card for mistakes of fact! Clerical errors and plain mistakes do occur during the valuation process. Here is a partial list of common mistakes you should check up on.

1. The dimensions of your home or the dimensions of your land are wrong.

2. Failure to note depreciation on adverse-onsite conditions or no depreciation or minimal deprecation shown for an older home.

3. The dimensions of your land are wrong.

4. Check all computations, whether or not you understand where the factors came from.

5. Failure to note depreciating off-site influences — a factory or landfill producing toxic fumes.

6. The quality of improvements are wrong — you have a stone not a macadam driveway, or — you have the low priced whirlpool tub not the big name expensive whirlpool tub.

7 Finished areas are listed incorrectly — basement is shown as finished and it is not.

8. The age of the home is listed incorrectly or the number of stories is wrong.

My father would not let the local tax assessor, who was also his best friend, go past the kitchen table at our farmhouse. My father was afraid he would see certain interior home improvements and he would increase our assessment. My father mistakenly believed that improvements he had made inside the farmhouse like a new bathroom sink, plaster repairs, wallpapering, new ceilings, new light fixtures would add to our assessed value. Likewise he put off making outside repairs until after the next revaluation because of fear of an increased assessment. Surprisingly, he was wrong. Outside repairs like roof replacement, repairing masonry, repair of porch, steps, stairs, etc. do not increase the homeowner’s assessment. Neither does replacing garage doors, or sheds, sidewalks, etc

Often establishing the proper combined property value for your home and the land under it is the key to your property tax appeal. To win your appeal the homeowner must establish his or her property’s value at a level lower than the one the assessor used.

To establish market value the homeowner can go to the web site http://www.zillow.com to get a rough estimate of the value of his home. The site uses some basic variables like square footage, number of baths, acreage and number of bedrooms to calculate a market value for the home based on a formula that is driven by other home sales in the neighborhood. Where zillow has the sales data this is a good first step to see if your home is assessed way too high.

In years after the revaluation year the homeowner should find out what the assessment to sales ratio for his or her taxing district is in New Jersey. This ratio is announced each year and is available from the local tax assessor’s office. It represents the average at which the assessed value for all properties that sold in the past year was compared to their sales value in the municipality. Why is it important? It may provides a key factor in proving that you have received an unequal assessment and are entitled to file a discrimination challenge to your property assessment to win a tax reduction.

An unequal assessment is one made at a higher proportion of market value than an average of the other parcels on the roll. A year or so after a revaluation housing inflation often makes the assessment your tax assessor placed on your home look low compared to sales prices of comparable sold homes in your neighborhood. But watch out!

A low assessment to sale ratio in a municipality can fool some taxpayers into thinking that they are being assessed below market value and are therefore getting a break. However, if all assessments are set below market value then the tax rate must be increased in order to collect the necessary amount of tax revenue. The same amount of tax is collected, but the taxpayers are fooled into thinking they’ve gotten a break and do not search for malassessments.

Now, do not forget that the assessment to sales ratio (or common level ratio) is a key factor in getting you property tax relief. Let me explain. An important test for fairness of your assessment is not just its relationship to market value. It is also whether or not it is fair in relation to assessments on other properties in your town. For example, if you have a home with a market value of $800,000, but it is assessed at $600,000, you may think you are getting off cheaply. However, if your neighbor’s house which is comparable to yours is assessed at only $200,000, you are paying three times as much real property tax as you should!

When your property is under appeal the County Board of Taxation can adjust your home’s value to the common level. The taxpayer should know the average ratio in the municipality where the property under appeal is located before filing a tax appeal. Remember the ratio changes annually on October 1, for use in the subsequent tax year. Also, remember this adjustment to the common level is not used in the year of revaluation or reassessment when all properties have been brought to 100% of market value.

Once the County Tax Board determines the true market value of a property they are required to automatically compare that true market value to its assessment value. If the ratio of the assessment to the true value exceeds the average ratio by 15%, then the assessment is automatically reduced to the common level. The homeowner gets his property tax relief. But watch out! If the assessment to true value ratio falls below the common level, the County Tax Board is obligated to increase the assessment to the common level. The homeowner would then get his property tax increased. If the assessment falls within the common level range no adjustment is made.

Each year on October 1 of the pre-tax year the assessor establishes a value for each of the properties in the municipality for the following tax year. The annual assessment value is considered tentative during the period of public inspection of the new tax list from January 1 to January 10th. The purposes of the inspection period is to enable the taxpayer to ascertain what assessments have been made against him or her and to confer informally with the assessor as to the correctness of the assessments.

At this point your approach can be informal and will not require a formal, written appeal. Taxpayers have an opportunity only once each year to file a formal property tax appeal. Get your tax form for property tax appeal purposes from your County Board of Taxation web site. Generally, it must be received by the County Board of Taxation on or before April 1 of the tax year. If the taxpayer misses the deadline for filing a formal appeal the taxpayer must wait until the following year to make a challenge for any tax relief.

The Property Tax Doctor can help the average homeowner win his rightful property tax relief. Under the common level adjustment, described above, the New Jersey’s statutory standard for an acceptable property tax assessment margin of error in its calculation is 15%. In New Jersey where the average homeowner in 2006 paid about $5,000 per year in property taxes that amounts to an acceptable error of $750 in the propertytax bill. If we administered our Federal Tax bill with that 15% margin of error we would have a taxpayer revolt.

Gerald Dowgin © 2006

About the Author:

Gerald Dowgin (The Property Tax Doctor) is the author of Homeowner’s Assessment Review Guide and has worked in the field of public finance at the State and local levels in New Jersey for more than three decades.
He has served as the Property Tax Assessor in 2 N.J. municipalities. He worked for the Division of Taxation principally on local property tax issues. Then he joined the (OLS) Office of Legislative Services and served as the Secretary to the N.J. Property Tax Assessment Study Commission for four years.

While working for the OLS a couple of his accomplishments include researching, drafting, and estimating the cost of such complex legislation that became law as the Senior Property Tax Freeze Bill and legislation that virtually stopped the tax assessment practice of “Spot Assessments” in New Jersey that had for years treated many property taxpayers unfairly. My web site will save you money on your next Property tax deduction by guiding the homeowner as to why, when and how to review his or Tax Assessment.

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