New tax law: Steps to cut property tax are worth effort, money after SALT cap

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The new GOP tax law included an unwelcome surprise for some homeowners: a $10,000 cap on the state and local tax (SALT) deduction.

The cap could cause financial pain for residents of some high-tax states where even middle-class houses can easily exceed that threshold.

Given the new cap, is it worth trying to lower your property tax bill?

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Experts say the effort can pay off, but be prepared to invest some legwork and even some money in the pursuit of a lower tax bill.

The first step is to figure out if you are likely to be affected by the $10,000 limit on SALT deductions. Homeowners whose property tax bills are close to that amount are likely to feel the financial pain, given that your total SALT taxes could get pushed above the new cap once state income taxes are included.

Next, you'll want to determine if you're likely to itemize your deductions in 2018. The Tax Cuts and Jobs Act almost doubled the standard deduction to $12,000 for single filers and $24,000 for married filers, a change that is effective for the current tax year.

"In many cases, the doubling of the standard deduction might be enough to offset itemizing deductions in order to take advantage of SALT deductions," noted Cheryl Young, senior economist at real estate site Trulia.

Feeling the pinch

Homeowners in California, New Jersey and New York are the likeliest to feel the pain of the new SALT deduction cap, she added. A Trulia analysis found that almost 1 out of 10 U.S. homeowners have property tax bills higher than $10,000. The metropolitan area with the highest share of tax bills above $10,000 is New York's Nassau County-Suffolk County region, where almost half of all homes have property taxes that exceed the new cap, Trulia found.

Even without the pain of the SALT cap, property taxes across the country are on the rise. Homeowners paid $18.4 billion in property taxes during 2016, or 4.6% more than in the previous year, according to the U.S. Census.

"We surveyed homeowners in October, so before the new tax law, and we asked them, 'Are your property taxes too high or too low?'" said Aaron Terrazas, senior economist at real estate site Zillow. "It's not surprising that many think their property taxes are too high."

How to start

If you've decided it's worth the shot, where do you start? Property taxes can change when a municipality increases its tax rate or when it changes the assessed value on your home. While you can't challenge the former, you have the right to appeal your home's assessed value.

Do a reality check about your home's value. Compare your property's value against similar properties in your area. If your home seems to be assessed at a higher amount than those comparable ones, that data will help you build your case.

"You have to make sure that the houses that you are showing them for comparables are comparable to your house, in terms of square footage and what your house has to offer," said Lisa Greene-Lewis, CPA and tax expert at TurboTax.

Hiring an independent appraiser is also helpful, said Zillow's Terrazas. But be aware that it can cost a few hundred dollars and require some time to book an appraiser, given that many are busy with appraisals for home buyers and sellers.

Making your case

Your property tax bill should include information about how to appeal your assessment. Every municipality has its own process, with some allowing an appeal at any time while others only allowing it once a year.

Remember to document everything, including photographs, your independent appraisal and comparable home information.

Some homeowners, such as seniors and veterans, may be able to take advantage of waivers or property tax relief programs offered by their municipalities or states, Terrazas said. Those residents may be able to get a lower tax bill without challenging their assessments.

One downside? The "hassle" of an appeal, Terrazas said, adding homeowners should make sure they have the time to devote to the process.