Tax Assessments and Tax Appeals

 Tax Assessments and Tax Appeals

An assessed value or tax assessment is a figure that a municipality uses to determine your tax bill. The tax assessment is related to the market value but is not a reliable indicator of its fair market value. The assessment is initially set when the property is built or converted into a condominium or undergoes a change of designation (e.g. two-family upzoned to a three-family). New Jersey only changes tax assessment when the following occurs:

- property is built
- building use converted (e.g. condo conversion)
- property improved (e.g. new kitchen)
- tax appeal
- revaulation

Periodically, as per NJ State law, municipalities are suppose to conduct a revaluation or reassessment. The purpose of a revaluation is to reset the assessment to market value. For the first year after the revaluation, the assessment should rough equal the fair market value. As time goes on, market fluctuations will force market values to deviate from the assessed value. Towns in Hudson County have failed to do revaluations in decades. Towns in Bergen and Essex County conduct them every 5 to 15 years. Each year the County Government issues a Equalization Ratio. This factor helps to normalizes the variations in tax assessments from town to town. The equalization ratio helps to ensure that each town is paying their fair share of county taxes. The Equalization Ratio is an expression of what percentage market value is of the tax assessments for a given year. A ratio of 100% indicates that assessments are equal to market values. This is the case the year after a revaluation. Hoboken's 2008 ratio of 29.25 indicates that tax assessments are roughly 29% of market values.

New construction's initial tax assessment is based on the ratio for the given year the new construction hits the market. The first tax assessment for a condo conversion or new building will be approximately the sales price multiplied by the ratio. The tax assessor does have some subjectivity in this decision and can make adjustments to account for pre-construction discounts or market values less than the sale price. Generally speaking, the assessment should never exceed the market value.

Your tax bill is the result of the multiplication of the assessed value by the tax rate. Watch your decimals here. Tax rates appeal to each $100 of assessed value. It is not a dollar for dollar calculation. Below are the tax rates for some towns:

Locality

Tax Rate

Ratio

BAYONNE

6.052

36.42

HOBOKEN

4.293

29.25

JERSEY CITY

5.552

25.64

NORTH BERGEN

4.362

41.54

SECAUCUS

3.23

44.46

UNION CITY

5.474

37.88

WEEHAWKEN

3.634

49.33

RIDGEWOOD

1.723

98.52

ALPINE

0.625

78.54

TENAFLY

2.585

69.97

RUTHERFORD

2.041

93.38

MONTCLAIR

2.301

99.24

NEWARK

2.599

57.84

MILLBURN

1.669

90.54

WESTFIELD

6.669

24.4

SUMMIT

3.435

38.8



You may be paying to much taxes if your assessment is arbitrarily out of whack with the rest of the town. To size up how strong your tax appeal might be first determine your Implied True Value.

assessed value / equalization ratio = "Implied True Value" (ITV)

If your tax assessment divided by your equalization ratio exceeds the market value of your home, you are overpaying in property tax. The Implied True Value should not be more than 15% greater/less than the Fair Market Value. Tax appeals can be filed every year. In January, you receive your notification of the assessment. Your tax appeal is due to be filed with the County by April 1st.

The first step in an appeal is an informal meeting with the tax assessor. This meeting similar to mediation attempts to resolve the appeal informally. I recommend that you hire a local professional that specializes in appeals to represent you at the hearing. Choosing a well regarded attorney or appraiser will ensure that your appeal has clout and is well presented. Local professionals often have a rapport with the tax assessor which can lead to a more favorable outcome than if you represented yourself. The tax assessor may make you an offer at this point. If the offer is accepted, the new assessment will remain in place for at least three years. If you do not accept the offer, you have the option of appearing in Tax Court to further challenge the assessment.