Clay & Company » A Texas Commercial Real Estate Blog

By Marty Kramer | Consumer columnist for TexasRealEstate.com

Have you ever protested your property-tax appraisal? I have. Twice.

The first time was easy. We had bought our home six months earlier, and the appraisal district thought it had appreciated 20%!

I attended an informal meeting with an appraisal-district employee. When she looked at the copy of our closing documents, she immediately adjusted the price down to our purchase price. Simple as that. She said I could have handled the whole thing over the phone.

My second appraisal protest was only slightly more complicated. I came to the informal meeting with appraisals of comparable homes in my neighborhood and pictures of my house.

The appraisal district employee and I went back and forth over the details, and after 10 minutes, she dropped the appraisal. Not as much as I’d requested, but still a helpful amount.

So, I didn’t make it to the formal hearing with the appraisal review board either time. I hear from a friend of mine that’s a little more stressful, but still a fairly easy process if you do your homework.

Here are a few things to keep in mind if you decide to protest your appraisal.

Meet the deadline

According to the Texas comptroller, you have to file a written protest (for single-family residences) “by April 30 or no later than 30 days after the appraisal district mailed a notice of appraised value to you, whichever date is later; however, an owner may file a notice before June 1 if the ARB has not approved the appraisal records. Note that it is 30 days after mailing the notice, not its receipt.”

Depending on when your district mailed notices or approved the appraisal records, you may still have time to file.

Follow the rules

You can’t protest your appraisal on the basis that your tax bill is too high. Not successfully, anyway. You have to show that your property has been appraised higher than what it’s actually worth … or higher than other similar properties in your neighborhood.

Bring evidence

Your opinion doesn’t carry much weight. Whether at an informal hearing or in front of the appraisal review board, you should focus on factual information supported by documentation.

Be nice

Some people come to an appraisal protest ready to do battle. I’ve heard some loud, nasty folks while I was there to protest my appraisal. I don’t think that works. Just my opinion, but I bet appraisal-district employees and the appraisal review board members will probably respond better to homeowners who are polite and respectful.

You can find more specifics about how to protest your taxes from the state comptroller’s website.

Source

By Luke Stenis for InvestingAnswers.com

According to the IRS, the average American received a $2,913 tax refund last year.

Tax refunds give you a great opportunity to improve your life and well-being, as well as your financial future. You worked hard for your money, so while it may sound nice to spend it on something that will be temporarily satisfying, you should consider making these 21 wise money moves instead:

1. Invest in a DRIP

Use your tax refund and invest in a dividend reinvestment plan (DRIP). The best thing about DRIPs is that they take advantage of the awesome power of compounding. Compounding is simply the process of earning dividends on reinvested dividends. Compounding is often described as “magic” because it is one of the easiest ways to build wealth and takes only a tiny amount of effort.

2. Seed a Growing Business or Start Up Company

Ever dreamed of starting your own restaurant, company or store? Follow your passion or invest in a friend by seeding a startup or growing business.

3. Pay Off Debt

While it is tempting to spend your tax refund on a summer vacation, paying off your debt can be just as satisfying. After all, when you pay off your credit cards, you’re essentially making a 13-20% return on your investment, depending on what APR you’re paying. That kind of performance would be hard for even the most sophisticated investor to beat!

4. Start a College Fund for Your Kids

Investing in your children’s education can be one of the most fulfilling experiences you can have as a parent. Put your tax refund into a 529 college savings plan or an Education Savings Account (ESA) and help out your kids in the future.

5. Grow Your Own Garden

Building a garden and growing your own food helps you develop a green thumb, and it also saves you money each year at the grocery store.

6. Save for Retirement

An old rule of thumb says that in order to retire comfortably, you will need to have enough savings to generate 80% of your pre-retirement income. So it is never too early to start saving for retirement, and there is no better time to tuck money away in your individual retirement account (IRA) you get your tax refund.

7. Pay Down Your Mortgage

Send your tax refund to your mortgage lender to make an additional payment on your mortgage. It will be worth it when you pay off your home sooner than planned.

8. Donate to Charity

Give back to a worthwhile charity that you are passionate about. Send financial help to relief organizations that are helping with recent large-scale disasters in Japan, Haiti and Africa. By donating your refund to charity, you also get a break on next year’s taxes.

9. Refinance Your Mortgage

Refinancing your mortgage can result in substantial monthly savings, but you usually need to bring some money to the bargaining table in order to get the lower rate you want. Your tax refund could be the perfect bargaining chip to make the deal.

10. Get a Gym Membership

Most gyms offer great deals for new members ready to opt in for at least one year. Do your wallet and your waistline a favor and find a gym that fits your workout style and has a reasonable refund/cancellation policy.

11. Invest in Your Own Value

Take a class at your local college or university, or enroll in a certification course. You could learn about cooking, self-defense or even investing in real estate. By investing in yourself, you can increase the market value of your own time and worth.

12. Renovate Your Home to Be More Energy Efficient

Projects that improve your home’s long-term efficiency are well-worth the investment. Solar panels, new roofs and better insulation is just a start to saving thousands each year on energy bills. Plus, these improvements can extend the lifespan of your home.

13. Invest in Real Estate

With interest rates remaining at historic lows, now could be the time to invest in real estate. Perhaps you can find your dream home, a rental property or just an upgrade to a better space for your family.

14. Adopt a Pet

Owning a dog or cat can improve your mood, reduce stress, control blood pressure, give social support, encourage exercise, stave off loneliness and provide unconditional love. If you like animals, there is no better time to adopt a furry friend.

15. Get Some Life Insurance

If you have children or own a home, the common rule of thumb is that you should have enough life insurance to cover 8-10 times your annual income. But because life insurance is very situation-specific, take a bit of time to educate yourself on how much life insurance is right for you.

16. Upgrade Your Computer

Computers are considered more than “gadgets” to family households. They are used for homework, research, communication, entertainment and storage for important data and files. A desktop or laptop that can keep up with you is an important part of running an efficient household.

17. Improve Your Own Health

Is there an operation, doctor’s visit or procedure you or someone you love has been putting off? Braces for the kids, dentures for grandma or sleep apnea for yourself? Tax refunds provide the perfect opportunity to take care of some important and overdue health expenses.

18. Start an Emergency or “Rainy Day” Fund

Experts recommend having 3 to 6 months of living expenses tucked away for emergency situations. Consider opening up a high-yield savings account for your tax refund and save it for emergency financial situations that may (or may not) arise in the future.

19. Take a Vacation or Start a “Sunny Day” Fund

Everyone needs a vacation. If it makes financial sense for you to invest your tax return in a “sunny day fund”, then dump your refund into an account set up for that purpose. Studies show that we value memories much more than we value stuff — but remember that running up debt to take that vacation is not a good idea.

20. Begin a “Car Replacement” Fund

Everyone’s car will eventually die, get wrecked or be “handed down” to a family member. And if you have teenagers or growing kids, it never hurts to start saving for a replacement vehicle sooner rather than later.

21. Create a Will

Planning for your death is by no means fun, but it is important. Leaving children behind with no legal guardian is any parent’s nightmare. If you have kids and don’t have a will, it should be your next financial priority.

The Investing Answer: Use your 2011 tax refund wisely in any of these 21 ways and the outcome can improve your life, well-being and financial future.

The opportunity to protect hard earned equity in the sale of an investment has been available to consumers since 1921. However, complexities and details of the tax code prevented only the most knowledgeable from using this option. In 1990 the Omnibus Budget Act clarified the process an opened this option to a broader set of consumers.

Section 1031 Exchanges, which have become more popular since the mid-90s, allow investors to defer the tax on capital gains until some point in the future.

Section 1031 of the Internal Revenue Code provides that no gain or loss shall be recognized on the exchange of property held for productive use in a trade or business, or for investment. A tax-deferred exchange is a method by which a property owner trades one or more relinquished properties for one or more replacement properties of “like-kind”, while deferring the payment of federal income taxes and some state taxes on the transaction.

The theory behind Section 1031 is that when a property owner has reinvested the sale proceeds into another property, the economic gain has not been realized in a way that generates funds to pay any tax. In other words, the taxpayer’s investment is still the same, only the form has changed (e.g. vacant land exchanged for apartment building). Therefore, it would be unfair to force the taxpayer to pay tax on a “paper” gain.

The like-kind exchange under Section 1031 is tax-deferred, not tax-free. When the replacement property is ultimately sold (not as part of another exchange), the original deferred gain, plus any additional gain realized since the purchase of the replacement property, is subject to tax.

Source

The article below addresses something all property owners must deal with. See this post for a video on fighting your taxes.

By Amy Wolff Sorter

DALLAS-In North Texas, it’s the time of year during which the frigid, 55-degree temperatures give way to the more temperate weather and the Bradford trees begin to flower. And, for commercial real estate owners throughout the Lone Star State, it’s that time of year to ensure the right paperwork, numbers and other information are on hand and ready in the event a property tax appeal need to be filed.

Experts tell Globest.com that, no matter when the assessment date or appeal date in a particular taxing jurisdiction, the best way to beat unfair tax rates is by having information ready. “What we’re doing at this point in time is assembling support data from our clients to build cases so we can determine if appeals are warranted,” says Jeff Kurz with locally based Kurz Group Inc. In other words, from the moment a commercial real estate owner receives his or her notice of appraised value, it’s a race against the clock to determine if a value is fair, and if an appeal is necessary.

Let’s take a look at Texas. January 1 is assessment day for the coming year with CRE owners receiving valuations by spring. After those valuations are received, commercial real estate owners have an eight-week window to file any kind of appeal, with that window snapping shut in July. Overall, it seems as though owners with commercial property in Texas are in luck — Rick Kurz, also with the Kurz Group says that, during the past three years, tax values have trended downward, with most of the county appraisal districts recognizing the impact of the economic downturn on real estate values.

But Texas seems to be an anomaly. On average, across the nation, “property owners of commercial real estate continue to see their taxes increase,” says David B. Wolfe, a partner with Skoloff & Wolfe PC in New Jersey. The reason is pretty straightforward: Cash-strapped municipal and county governments need a way to get revenue. So, despite the decline in value of commercial real estate, municipal and county taxes increase. “It’s a competing situation,” notes Peter Foster Kelsen, a partner with Blank Rome LLP in Philadelphia. “Since the economic downturn, cities are becoming more desperate for revenue, while property owners are feeling the pinch because rents in the commercial sector have dropped.” As a result, “assessments may not reflect the current reality,” Kelsen says. Unlike, say, Dallas, TX, taxes in Philadelphia have been steadily marching north since 2008. What has changed in the City of Brotherly Love, however is that the number of appeals has increased.

Even in Texas, property taxes are frustrating and for reasons other than the obvious. It’s a given that a property tax expense line on any income statement is pretty large. But it’s difficult to pigeonhole that expense line. “It’s a moving target,” Rick Kurz says. “You can generally come up with maintenance and repair budgets for a given year and be reasonably on budget. But property taxes aren’t that simple. Any increase or decrease in property tax assessments can have a dramatic impact on the net operating income of a piece of real estate.”

The good news, however, is that reductions in taxes are possible. More than possible. “My sense is that, in many cases, reductions have been made by the taxing authorities based on the fact that market value has contracted, income has contracted and sales are few and far between,” Kelsen says. The experts in this article point to the fact that they’ve been successful in obtaining reductions for clients. But doing so requires numbers proving an unfair assessment – and the sooner those numbers can be collected, the better.

Jeff Kurz says the “must have” in any kind of assessment reduction tool kit is income and expense information from the previous year or years. The more a trend can be suggested, the better off the owner. “If they’re using a consultant, consultants are requesting that information between now and when the notices come out,” Jeff Kurz adds. The Kurz Group is walking the talk as well.

“Right now, we’re looking at cap rate studies and are doing a thorough scrub of our clients’ financials,” Rick Kurz says. “We’re looking at historical trends and trying to figure out how financials look this year relative to last year.”

In addition to having the financials ready, what is also helpful, Kelsen suggests, is finding a credible property appraiser and having that person conduct a careful assessment of the property to back up the numbers. It’s also hugely important to be aware of the deadlines for filing appeals. Though this might be a given, different jurisdictions have different filing dates – and to a commercial real estate owner with assets in multiple states, those deadlines can quickly loom. “I get dozens of calls from people who are in trouble and who want something done,” Kelsen says. “But it’s three months after the deadline for filing an appeal. I can’t do anything.”

The experts also believe that hiring a consultant or an expert in the field of commercial property can be helpful. Wolfe notes that attorneys who do a significant amount of work in that field can provide guidance as to whether an assessment is out of line; the best place to find an attorney is through an organization called the National Association of Property Tax Attorneys. The Kurzes acknowledge that individuals can certainly do as good a job of filing their own appeals, however, an experienced eye can determine whether taking the time to do so is worth it.

But is it? Certainly paying lower taxes is a good thing, but Wolfe cautions that, in some jurisdictions, “you appeal at your peril. Your assessment can be increased as a result.” Furthermore, Kelsen says, in some jurisdictions, even if the assessing authority makes reductions, the school districts and municipalities are filing challenges to those reductions. “They’re doing what they can to protect their tax base,” he adds.

But with realistic numbers and facts to back those numbers up, the chances are good that taxes can be reduced. “For the most part, assessing authorities are receptive,” Kelsen says. “But they need to be given the data that supports the request for a lower value.”

Source

This video from smartmoney.com explains how to fight your property taxes. Although it concentrates on residential real estate taxes many of the tips can be used when fighting commercial property taxes as well.

If this process is new to you or overwhelming, let Clay & Company know and we can help guide you through the process.