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Property tax concerns for real estate owners and the collecting local governments

May 6, 2024

Money houses in line

Our annual property tax protest has been filed. Not by us. We finally hired a company to take care of it.

But the hubby and I and our neighbors are not the only ones concerned about property taxes.

So are the government officials in charge of levying and collecting them, albeit for different reasons.

Property tax problems: Real estate taxes are the primary financing source for city, county, and other local governments.

Tax Foundation analysts found that in fiscal year 2020, property taxes comprised 32.2 percent of total state and local tax collections in the United States, more than any other tax revenue source.

That money source, however, has been under stress.

There was, of course, the coronavirus-prompted shift to remote work. This has left many urban areas dealing with underused office buildings that have dropped in value. Some suggest commercial building values could fall by half in many cities.

There’s also the political component. Local governments set property tax rates, but state legislatures often impose limits on how much those rates can rise, as well as cap assessed values.

The pandemic and politics also combined to create another challenge. Many states reported budget surpluses in part thanks to significant federal aid provided during the COVID-19 years. That allowed lawmakers to enact property tax relief, especially for residential owners (aka voters). Now they must figure out how to deal with that slowed tax flow.

Riley Judd, in a recent article for Governing magazine looks at some of the solutions states are exploring. Their goal, writes Judd, is to provide permanent tax relief without harming local revenue.

Options being discussed include delaying some income tax cuts and legalizing recreational cannabis or online gaming. Those are just as likely (or more) to get voters amped up as are property tax matters.

As the examples in the article show, it is not an easy task.

Commercial RE tax concerns: On the commercial side, the Tax Policy Center (TPC) has issued a new analysis of how dependent 47 major cities are on tax revenue from business buildings.

Reliance_property_tax_Tax-Policy-Center-2024-analysis

Source: Tax Policy Center TaxVox blog

Combining those data with an estimate of future office values, authors Richard C. Auxier, a TPC Principal Policy Associate, and Thomas Brosy, TPC Senior Research Associate, made two forecasts of revenue shortfalls by 2031 in 13 cities for which complete data were available. 

They found that the most at-risk cities under their forecast were cities that either relied heavily on commercial property tax revenue pre-pandemic, such as Boston, or had particularly strong commercial property value growth over the previous decade, as here in Austin.

You also might find these items of interest:

 

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TAX-SAVVY WAYS 
TO WRAP UP 2026

It’s over! With October’s extended filing deadline behind us, it is now time to focus on year-end moves to reduce your 2026 tax bill. 

You’ll find ways to do just that on the Tax Tips page (see the More Tax Posts drop-down menu at the top of the blog), as well as the separate tax tip pages for each month, notably October through December. If you’re on the Tax Tips page, you’ll find a monthly list at the end of this column. If you’re on another blog page, you can head straight to the October tips; at the bottom of that tips page you’ll find links to all the other 11 months’ collections of tax advice.

Not to spoil what you’ll find in that tax advice, but it does cover such things as tax deductions for charitable donations, investment moves that could reduce tax due, and ways to max out your tax-favored retirement savings. 

Finally, as the year winds down, things get hectic. There are lots of other things to occupy our time, like the much more fun upcoming holidays. But don’t lose sight of taxes, since timing is key. To be of use, most tax moves must be made by the end of the tax year. That’s Thursday, Dec. 31, which also is the last business day of the year. 

So that you don’t miss that final tax year deadline, also keep an eye on the countdown clock below. It will keep you on top of just how much time is left to make important, tax-saving moves. (Note: I’m in the Central Time Zone, so adjust accordingly for where you live.)

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