Property tax appeals on the rise

As real estate values drop nationwide, the number of homeowners appealing their assessments has increased.

The number of appeals for the 2007 tax year went up anywhere from 10
percent in Collier County, Fla., to almost 90 percent in Clark County,
Nev., according to the Associated Press.

The median sales price in Chicago was down nearly 10 percent in
October from a year ago, reports the AP, and property value challenges have more than
doubled in Cook County, Ill., from about 127,000 in 2005 to about
277,000 last year.

''They're willing to pay their fair share, but
they don't want to pay more than their fair share,'' Joseph
Berrios, one of three commissioners on the Cook County Board of Review, told the wire service.

Of course, those taxpayer savings on property taxes could cost them in terms of local government services.

Although there's no data tracking the trend nationally, says the AP, the lower
property valuations obtained by homeowners who successfully appeal will ultimately will cost local governments in the form
of lower tax receipts, according to Robert Van Order, an associate professor of
finance and real estate at the University of Michigan.

Anecdotally, Van Oder's assessment is already showing up.

With the housing market taking a dive, property taxes in Monterey County, California, are falling fast with it. Monterey County Assessor Stephen Vagnini told Fox 35 that about 70 percent of the county's non-program revenue comes from property taxes. Just last year, lower property taxes lost the county about $5 million in revenue.

Appeals process issues: Every jurisdiction offers its homeowners a way to appeal their property taxes and/or assessments.

Some key things you need to keep in mind or find out include how your tax rate is set, how property values are determined, exactly what homes are worth in your neighborhood and what are the deadlines for any appeal. This story provides a good overview of the general property tax appeal system.

Taking tax advantage of property taxes: Regardless of what your ultimate real estate tax bill turns out to be, with or without an appeal, remember that you can use the amount as a deduction on your federal tax return.

Homeowners who itemize are well aware of this tax benefit. You list your full property tax bill on Schedule A, line 6. Add it to the rest of your expenses, such as mortgage interest and charitable donations, and you likely have a nice amount to deduct from your income.

And now, effective for both the 2008 and 2009 tax years, property owners who claim the standard deduction also can get a federal income tax benefit from their local real estate tax payments.

Taxpayers who don't itemize can add part (or all) of their property tax payments to their standard deduction amount. The deduction is limited to the lesser of the actual real estate taxes paid or $500 for single taxpayers and heads of households and $1,000 for married taxpayers filing a joint return.

So all property owners and property tax payers, whether they itemize or claim the standard deduction, should consider paying real estate tax bills by Dec. 31 in order to take advantage of the tax break on 2008 returns.