If nothing has changed since you’ve owned a property, would you think your building is eligible for a property tax valuation reduction?
Even if a building itself remains unchanged, many forces still influence its tax value. To ensure you’re not overpaying commercial property taxes, it’s worth examining your assets from several angles.
Consider the following seven examples of where you could find potential hidden tax savings within your commercial property portfolio.
- The neighborhood changes: External forces out of a property owner’s control often impact property tax valuation. For example, if a power plant, factory or other “disruptive” facility is built across the road from your property, it’s likely to affect the property enough to merit seeking a tax value reduction.
- Erroneous records: When one department in a county office is responsible for keeping track of every building in its jurisdiction, mistakes sometimes happen. It’s not uncommon for property misclassifications to negatively affect a building’s tax position. For instance, if an industrial building is misclassified as an office building, it won’t be assessed fairly. Initiating an appeal in this instance could lead to a tax refund for the property owner.
- Changes in BOMA standards: The Building Owners and Managers Association (BOMA) may have updated its standard method of floor measurement since you last measured your office space. (For office buildings, the last update occurred in 2010.) If you re-measure your building to new BOMA standards and find that you have fewer square feet than previously measured, that difference should be reflected on your property tax assessment.
- Obsolescence: Hidden tax savings are often uncovered in manufacturing facilities due to obsolescence. For example, in a poorly designed plant, workers take longer to finish tasks when measured against industry standards. This creates a form of functional obsolescence that could merit a reduction in tax valuation. Or, if economic conditions force a manufacturer to eliminate its third shift, the idle machinery sitting in the building overnight contributes to economic obsolescence that should be factored into the property’s tax valuation.
- Discrepancies between the market and reality: If the local taxing authority taxes your space at market value when you’re leasing the space at below market value, you should consider appealing for lower property taxes.
- Ongoing deferred maintenance: Continuously delaying maintenance projects prevents properties from being in the best condition possible. Property owners with assets that have many deferred maintenance projects should seek a lower tax valuation based on the condition of their buildings.
- Overvalued land: When it comes to lowering the tax value of a property, the building itself gets most of the attention. But it’s possible that the tax value of the land is also too high. When assessing a property for a tax appeal, don’t overlook the tax value of the land; ensure it’s being assessed at fair market value.
Many moving pieces affect a property’s tax valuation. Staying on top of them all is challenging, but the effort is worthwhile when you gain a cash windfall in the form of a tax refund check or implied tax savings.
If you don’t have the time or manpower to comb through your assets and capitalize on hidden tax savings, consider joining forces with a property tax expert that has the resources and dedication required to help you uncover all the hidden money in your commercial property tax assessments.
Download RPTA’s free whitepaper, “7 Signs You Might Be Overpaying Your Commercial Property Taxes" for more insights into the commercial property market and to learn how to uncover hidden property tax savings.