What to Do After Getting Hit With a Big Property Tax Bill 

Key Takeaways: 

• An increase in property values typically leads to a higher annual tax bill.  
• You have the right to appeal your property tax bill if you believe your home is overvalued. 
• You can tap into your home equity to cover an unusually high tax bill.  

According to North American Community Hub Statistics, property values have increased by 8%-9% over the last five years, which is up from the 10-year average of 6%-7%. This surge is good for your home equity levels, but you may not feel like celebrating when you receive your annual property tax bill.  

Getting hit with an unexpectedly high tax bill can be stressful, especially if you don’t have the room to cover it in your budget. But ignoring the problem won’t make it go away, and can lead to penalties, fees, or even tax liens. Fortunately, there are steps you can take to manage the situation. 

How your tax bill works 

Your property taxes are based on the value of your home and the tax rates set by your state and local governments. Since property values change over time, assessors hired by your local government are responsible for regularly reassessing property values.  

Here are the steps that go into determining your property taxes: 

• Assessed Value: Assessors usually start by evaluating the value of your home and land. They may look at what similar homes are selling for in your area. It’s important to note that the assessed value isn’t necessarily what you could sell the home for — it’s based on how much the property is worth for tax purposes. 
• Local tax rates: Next, the government multiplies the assessed value by the property tax rate in your area. Property tax rates vary depending on where you live — for instance, New Jersey residents pay some of the highest property taxes, while Alabama has some of the lowest rates.  
• Exemptions: Many local governments do offer property tax exemptions for certain homeowners. Seniors, veterans, or individuals living with a disability may qualify for an exemption. 
• Property tax notice: You should receive a property tax notice in the mail stating your property’s value for tax purposes. It should include information about your property details, the appraised value, and the market value. It should also include a deadline by which you can appeal if you disagree with the appraised value.  

Reasons why your property tax bill might rise

Property taxes usually go up because there’s an increase in the value of your property. Here are some common reasons why that happens. 

You moved to a new area

Property tax rates vary by city, county, and state, so moving to a new home can cause your property taxes to increase or decrease. That’s the case even if your new home is of comparable value to your previous home. And multiple municipalities can impose taxes on the same property, so moving from a rural area to a more urban area can cause your taxes to increase. 

You made home improvements

Home improvements are one of the most common causes of property tax increases. And you don’t have to add a major addition to your house for that to happen — even small projects can lead to a reassessment. In general, anything that adds value to your home can also trigger a tax increase.

Increase in home sales

If a large number of homes in your neighborhood have sold recently, this can lead to higher property bills. Nearby construction and the addition of new amenities to your neighborhood, like a swimming pool or golf course, can also cause property taxes to rise.  

Expired exemptions

Property tax exemptions reduce the assessed value of your home for tax purposes, reducing the amount you owe. When an exemption expires, your property reverts to the full assessed value, leading to a higher tax bill.  

Government changes

Government changes can also increase your property tax bill. For instance, if voters approve an initiative to fund a new school building, that could lead to a property tax increase. Or the government could change its reassessment schedule or the way property values are calculated, which could also affect your tax bill.

Steps to take after a property tax hike

In many areas, assessors must notify you if your property values increase — here are four steps you can take if you learn your property taxes are going up.  

1. Review the bill
   Start by reviewing the bill to verify its accuracy — assessors often rely on historical data to assess property values, so you want to check for any obvious errors. For example, basic details about your home could be incorrect, like its age or square footage. Processing errors can also occur, like incorrectly estimating the property tax. 
   
   You can also request a copy of your property tax card by searching the county assessor’s website or visiting their office. Depending on your county, this information may also be available online. 
   
   A property tax card is a document maintained by the local government that contains information used to assess your property’s value. This likely includes data like the square footage, number of bedrooms and bathrooms, and any known home improvements. Reviewing this card is another way to spot potential inaccuracies that could be inflating your property value.  
   
2. File an appeal
   If you believe your property was overvalued, you have the right to appeal your tax bill. Be sure to check the deadline for appealing — if you miss it, you forfeit the right to challenge your property tax assessment for that year. 
   
   You may have to pay a small filing fee to have someone review your appeal. Make sure to include supporting documentation like comparable homes in your neighborhood, photos, and errors that occurred during the appraisal. If your appeal is successful, your property values will be adjusted, which should lead to a lower property tax bill.
   
3. Consult an expert
   If you don’t have the time to handle the appeal on your own, a property tax consultant can walk you through this process. This individual can research your home’s value and file the request for you. You could also hire an outside appraiser to evaluate your home — just make sure they have the proper state license or certification.
   
   You can find a property tax consultant by asking your real estate agent for a referral. You can also search local directories, like the National Association of Property Tax Attorneys, or online search engines like Yelp to find highly-rated individuals in your area. 
4. Consider tapping your home equity to pay property taxes 
   If your appeal is unsuccessful, your property values will remain the same, and you’ll be on the hook for the full tax bill. If this happens, you can consider tapping into your home equity to make the payment. There are a variety of ways to do this, including a home equity line of credit (HELOC), home equity loan (HEL) or home equity agreement (HEA).
   
   A HELOC is a revolving line of credit that allows you to borrow against the equity in your home. HELOCs are a good option if you’re unsure of how much money you’ll need, but you’ll often receive variable interest rates, so the repayment amounts can change each month.  
   With a HEL, you’ll receive a one-time payment and fixed interest rates. However, you’ll typically have to pay closing costs on a HEL, which are between 2% and 5% of the total loan amount. 
    
   If you’re looking for an option that doesn’t require you to borrow against your home, you may consider a home equity agreement (HEA). Unlike a HELOC or HEL, a HEA isn’t a loan — there are no interest charges or monthly payments. You get to decide when the agreement ends by either buying back the provider’s equity or selling your home. 
   
   It’s important to create a plan to stay current with your property taxes. Failing to pay your property tax bill can result in having a lien being placed on your property.  

How to avoid future surprises

Property values can fluctuate quite a bit from year to year, especially as home values continue to rise. To avoid being caught off guard by future tax bills, it’s a good idea to stay ahead of potential changes.  

Start by learning how often your local government reassesses property values — some areas do this annually, while others do it every few years. It’s also a good idea to monitor local tax rate changes through county meetings or public notices. 

Finally, keep track of your own home improvements and upgrades since even minor updates can increase your property value. Before you start an update to your home, consider how it could impact your future tax bill.   

The bottom line 

Nobody enjoys receiving a higher-than-average property tax bill, but it’s important to act quickly. Start by reviewing your bill for accuracy and file an appeal if you believe it’s incorrect. You can also consider using your home equity to cover the cost through a HELOC or HEA.