One of the most critical components of the real estate business is the property tax assessments for residential and commercial properties.
But, most of the time, real estate owners feel burdened with high commercial tax bills. The reasons are many. Therefore, it is necessary to review your tax assessment if you want to have the correct picture of fair market value.
Property owners or investors should not consider it lightly, as overburdened taxes can hinder your company’s growth. The assessment is mainly done by local tax authorities, and it may not always present an accurate value of your property.
Pursuing a commercial tax appeal is always a wise move in such situations.
In this article, you will learn about behind higher commercial tax and why you should make a commercial tax appeal.
Why Your Commercial Property Tax Could Be Higher and Reason to Appeal
A tax appeal can be a viable solution for higher commercial tax assessment due to several reasons. Let’s find out how:
1. Discrepancies in Property Valuation
One of the primary reasons behind the overburdening of commercial taxes is incorrect property valuation. The reason could be outdated property management techniques and varying property market values,
Why Should You Appeal- You can appeal for evaluations that increase your liabilities and ask for a valid property assessment. For this, you will have to present enough evidence for the actual value of the property.
2. Misclassification of the Property
Sometimes the tax authorities inaccurately classify your commercial properties which leads to wrong assessment and higher property taxes.
Why Should You Appeal- Appealing for the wrong classification of property and providing them with the exact classification reports can help you lower tax burdens.
3. Property Depreciation Not Considered in Assessment
You must remember that properties are also subjected to depreciation because of wear and tear and physical aging. But, if the assessor has not included amortization in the tax assessment, you must have received an overburdening tax report.
Why Should You Appeal- If depreciation of property is not included in the property assessment, you can claim for reassessment. You need to provide them with some evidence to prove depreciation such as photos showcasing the property conditions, all maintenance records of the property, or present an appraisal report while appealing.
4. Changes in the Property Use
There might have been changes in the way you utilize the commercial property. If it is now used for other purposes that qualify for lower rates and the tax department is unaware of that, the tax assessment would eventually be higher.
Why Should You Appeal- You can appeal to the tax assessment authorities, mentioning the changes in the property use and requesting that your tax liability be reduced.
5. Clerical Errors
If the tax assessment system is not entirely automated, the chances of human errors can be higher. Clerical errors at the time of data entry or mistakes in calculations can lead to wrong assessment which can be noticed only after a careful review.
Why Should You Appeal- An appeal will allow you to rectify those errors and reduce your tax burdens.
6. Changes in Market Conditions
Various factors impact the property’s market value in the real estate business. Some of these are pandemics, economic downturns, natural disasters, or changes in industry. Sometimes these factors adversely affect the property value, and thus your property assessment is not done accurately.
Why Should You Appeal- You can appeal for a lower assessment aligning with the current market conditions and readjust your tax bill.
7. Renovations or Obsolescence Not Considered
Some commercial property features become obsolete because of specific renovations or technological advancements. These features can be overlooked during tax assessments.
Why Should You Appeal- You must bring the tax department’s attention to this point by making a commercial tax appeal. This can help you in reducing tax burdens after the reassessment of property.
Essentials While Making a Tax Appeal
A commercial tax appeal can be made if the property owner is sure that some expenses are missing in the tax assessment received. But, before appealing, one should get it reviewed by some third party to ensure there is some scope for it.
Your appeal can be approved or rejected depending on the points you mention and the evidence you provide for them.
Go through all the documents carefully and research to understand the appeal process.
Learn about all the rules and procedures for making a tax appeal
Collect strong evidence supporting your claims.
Always consult a professional tax consultant or property appraiser before appealing.
Conclusion
YProperty owners or real estate businessmen must have a basic understanding of the reasons behind high property taxes. To secure a better taxation structure they can apply for a tax appeal for any discrepancies and errors in tax assessments.