Ep. 23: Understanding Ohio Property Taxes

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Understanding Property Taxes in Ohio: Values, Appeals & More

Get ready to unravel the complex world of property taxes in Ohio with Attorney Ted Gudorf. This episode will leave you better informed and prepared for the ever-changing property tax landscape. Ted walks us through the recent surge in property values, breaking down what this means for you as a property owner, and how it differs from your home's resale value.

Our host dives into the intricate details of the mass appraisal system employed by local counties and the independent appraisal process which determines a property's fair market value. Ted offers invaluable insights into how to appeal your property's value, the overall impact of property taxes on local school districts, and potential changes looming in property tax laws. All this and more in this episode of Repair The Roof!

Key Topics:

Tax Value and Fair Market Value (02:24)

Mass Appraisal (04:34)

Appealing an Appraisal (06:28)

Real Estate Tax in the State of Ohio (08:46)

Funding School Districts (11:23)

Challenges to Property Tax (13:18)

Wrap-Up (17:15)

How Property Values Are Determined for Taxes

In Ohio, each county has an auditor that is responsible for determining property values for tax purposes. This process of valuation is called a mass appraisal. The goal of a mass appraisal is to assign every parcel of property a tax value every 3-6 years. This allows the county to distribute the property tax burden across all land owners.

It's important to understand the key difference between a mass appraisal and a standard appraisal you may get when selling your home. Mass appraisals are not trying to identify the absolute highest value that a property could sell for at a given time.

Instead, their goal is to evaluate the relative value of homes in an area to establish fair taxation values.

As a result, mass appraisal values tend to be lower than true market values. Here is how the mass appraisal process works in Ohio:

  • An appraisal company will be contracted to handle the county's mass appraisal.
  • Appraisers physically assess each property once every 6 years. This involves taking measurements, photos, and notes on the land and improvements.
  • In the interim 3 years between physical appraisals, drive-by reviews are conducted. Values are adjusted based on recent comparable property sales.
  • Property owners are notified by mail of their new valuation each year by the county auditor.
  • There are opportunities to appeal the value if you believe there are errors. More on the appeal process later.

Whenever a full reappraisal is conducted, many property owners are surprised to find their tax value increasing substantially more than the standard 3% per year. A jump of 10-15% in a single reappraisal year is not uncommon.

How Millage Rates and Taxes are Calculated

Once the mass appraisal establishes the county auditor's valuation of your property, your property taxes owed are calculated based on millage rates.

One mill equals $1 for every $1,000 of taxable value. But it's important to note that in Ohio, the taxable value used to calculate taxes is not the full auditor's assessed value.

Instead, property taxes are based on just 35% of the auditor's full valuation.

For example, if your home is valued by the auditor at $100,000, your taxable value would be $35,000. At a millage rate of 1 mill, you would owe $35 in property taxes ($1 for every $1,000 of the taxable value).

Local jurisdictions like school districts, counties, cities, townships, and others can place property tax levies on the ballot for residents to vote on. Most levies are proposed to collect a fixed dollar amount, so as property values rise the millage rate is adjusted downwards to prevent collecting additional revenue.

In Ohio, the vast majority of all property taxes (about 60% statewide) go to fund local school districts. This reliance on property taxes vs. other sources like income tax is currently being debated in Ohio politics. More on this later.

How to Appeal Your Property Value

If you believe your property has been overvalued by the county auditor for tax purposes, you have the right to appeal and try to reduce your valuation. This can lead to lowering your millage rate and saving substantially on property taxes.

Here is the process to appeal your home's valuation in Ohio:

  • You must file a written appeal with your county auditor by March 31 each year.
  • Your appeal will be heard by the county Board of Revision at an informal hearing.
  • You must provide concrete evidence like photos, appraisals, comparable sales, etc. demonstrating that your home is overvalued.
  • If the error is obvious and documented, the board may reduce your home's valuation for tax purposes.

For example, you may provide photos clearly showing an incorrect fact in your appraisal, like a supposed structure that doesn't actually exist on your land. Appraisals you've had done recently for refinancing can also be strong evidence.

The key is having irrefutable proof that the auditor's valuation is wrong. Hearsay or unsubstantiated claims are unlikely to prevail. If the evidence is convincing, the Board of Revision can order your property value reduced.

One important caveat is that you cannot appeal retroactively in Ohio. Your appeal must be filed by March 31 of the current tax year, and you can only challenge that year's valuation.

Other Important Property Tax Issues in Ohio

A few other notable points and trends related to Ohio property taxes:

  • There is proposed legislation that would change how values are determined, such as using a 3-year average valuation rather than the triennial county appraisals. This could help smooth out large value jumps in reappraisal years.
  • With Ohio income tax cuts recently enacted, property taxes may rise to compensate for the reduced revenue. Critics argue this disproportionately burdens middle and lower class homeowners.
  • High property taxes can lead to foreclosure. Ohio has seen a notable increase in tax foreclosures over the last 5 years, especially in cities like Dayton.
  • In addition to homeowners, commercial and investment properties face substantial tax burdens in Ohio. Their values and tax bills can also be appealed.
  • Non-school jurisdictions like counties, cities, and townships are limited to collecting 10 mills or less in property taxes without voter approval. Additional levies must go on the ballot.
  • Only voters that live within a given jurisdiction get to vote on that jurisdiction's levies. Sotaxes target the direct beneficiaries.
  • There is debate around whether school districts should have standing to challenge property valuations. Currently they can participate in appeals, to the dismay of some homeowners.

Finding Help with Property Tax Issues

As seen above, navigating Ohio's property tax code can be confusing for homeowners and businesses alike. If you need help filing an appeal to reduce your taxes, or strategizing how handle a sharply higher tax bill, consider connecting with a local property tax attorney.

An experienced property tax lawyer can review your situation, advise you on the strongest appeal arguments, and represent your case for a lower valuation before the Board of Revision.

With some expert guidance, you may be able to substantially reduce your property tax burden. But time is of the essence, as appeals must be completed by March 31 each year.

Don't hesitate to get started on an appeal today if you think your property valuation is wrong. A successful appeal could save you thousands of dollars annually in lower property taxes.


Transcript: Prefer to Read — Click to Open

Hello everyone, my name is Attorney Ted Gudorf. Welcome to the Repair The Roof podcast. This name comes from President Kennedy’s famous quote, “the time to repair the roof is when the sun is shining.” In this show, we help individuals and families learn more about all things estate planning and elder law. This is episode 23 – Property taxes in Ohio.

Most of us own real estate, that real estate is subject to a tax that is oftentimes called a property tax. It is not unique to Ohio, but not all states tax real estate, but most do. Taxes in Ohio are collected in arrears. That is, the payment that is due in July of 2023 is for the first half of property taxes for the year 2022. How is it that the value of our property is determined by the government? How are the tax rates set? What is the assessment process? Are there rights to appeal? And then finally, are there payment plans available? We are going to discuss these issues today. One of the reasons why this has become a current issue is that the State of Ohio has recently indicated to Montgomery county that its property values will rise on average for residential owners a whopping 32% in one year. The State of Ohio has also notified the residents in Greene county, which is next door to Montgomery county, that its values for residential owners will rise 37%. What is the significance of the rise in property values? Well, you might think that overall, if you are a property owner, you want your value to go up. Now, the first thing that you have to become aware of is that there is a difference between what value the government puts on your property for tax purposes, and the value that you can ultimately sell your property for. All too often, my clients do not understand the distinction to be made. On the one hand, if you are going to show your property, you want it to be highly valued. On the other hand, if you are going to be taxed, maybe you do not want that value to be quite so high. Well, you will be pleased to know that there are two different systems by which we determine the fair market value of property versus the tax value. So oftentimes, the fair market value of property is determined by a private appraisal firm. For instance, if you want to buy a piece of property, and you go to a bank and want to borrow money, the lender will recommend an appraisal be done. That appraisal these days has to be done by an independent appraisal company. They will go out and based upon the description of the property, based upon their inspection of the property and based upon recent sales within the market that are comparable, they will place a value on the property for purposes of resale or refinance.

A completely different process is done by our local counties. Property values are initially set at the county level. Typically what happens is that our county auditor will let out a contract for a private firm to do what is called a mass appraisal. The mass appraisal process requires that each property be driven by at least every six year and that every three years, instead of driving by, they simply do a revaluation based upon recent sales. The mass appraisal system is intended to be a process whereby every parcel within a given county can be looked at and given a tax value. Oftentimes, that process, at least historically, for tax purposes, has undervalued the property when it is compared to the fair market value for resale. The mass appraisal system is not trying to get the highest value that you might possibly get at any given time. That is not what it is intended to. So overall, we are trying to establish the value of the property for tax purposes through this mass appraisal system and then the county auditor is required to periodically on a triannual basis, update those values. Now, once the values are determined, the property owners are required to be notified in writing by the county auditor. Each year, we have the ability to appeal that value, but if we are going to file an appeal of the auditors determination of the value, it has to be filed on or before March 31 of each year, and it must be completed in writing. Those appeals go to what is called the board of revision, the board of revision will conduct a hearing, you will be given an opportunity to attend and present evidence and you do have to have evidence in order to try to reduce the value.

Let me give you an example in my own case. When I purchased my home, my home was on two lots. One lot held my house and the other was a vacant side lot. The vacant side lot always had a value of $10,000 placed on it by the county auditor until a few years ago, it doubled the value of that parcel. When I inquired of the county auditor as to the reason for the doubling in value, it indicated that there was a structure located on the side lot. By the way, there was no structure on the side lot, there was a basketball court, but not a structure. So based upon the erroneous information that was indicated through the appraisal, I filed an appeal to the board of revision. In that instance, I simply brought in photographs of the side lot demonstrating that there was no structure on the side lot and therefore the value should be reduced to what it had been previously. That appeal was granted based upon the error made during the appraisal. That gives you one example of how you can file an appeal.

So how is real estate taxed in the State of Ohio? Local jurisdictions put on property tax levies that are voted on by the residents. Furthermore, there is a basic 10 mils of uncoated millage that is assessed in the state of Ohio. Now, what is a mill? One mill is equal to $1 of taxation for every $1,000 of taxable value. So it is $1 for every $1,000 of taxable value. What is important to understand is that in the State of Ohio, the tax assessment is based upon 35% of the county auditor’s tax value. So if the mass appraisal system determines that your home is worth $100,000, the portion that will be assessed will be 35% of that, or $35,000 and therefore, for every one mill of property taxes that are to be collected, the amount owed will be $35. Now, there are jurisdictions that will collect 50 mils, 60 mils or 70 mils, again, simply utilizing the same formula that is that one mil equals $1 for every $1,000 worth of value, you can determine how the amount of taxes is calculated. Now, in the state of Ohio, the vast majority of our property taxes in Montgomery county, it is estimated that that 60% of the $900 million worth of property taxes that are collected by Montgomery county will go to local school districts. It is the property tax that is the primary funding mechanism for most of our local school districts. While school districts have been allowed in recent years to propose an income tax, the vast majority of our districts have not done so. But instead they continue to rely upon the property tax as the primary mechanism for funding. Now, in addition to school districts, that counties as well as villages, cities, townships, and special districts, like vocational districts, or like community colleges, or like the library district, also have the ability to propose and vote upon property tax levies and those property tax levies, for the most part, are put on the ballot to raise a fixed dollar amount and therefore, as property values go up, tax rates get adjusted, so that those levies will not bring in any additional revenue. Oftentimes, those kind of property tax levies are renewable or replaceable every five years or so, because the new levy will if voted on and approved, if it is a replacement levy will be allowed to capture additional revenue above and beyond when the levy was initially adopted. So here in Ohio, property taxes are substantial, and they are collected at the local level. If you want to contest or challenge the value that the county auditor has placed on your property, you have to file the appeal before March 31st of each year and you cannot go back to prior years, you are only able to challenge the current year. Traditionally, the school district is allowed to participate and be notified of any board of revision hearings. There have been some recent changes in the law with respect to whether school districts do or do not have the standing to be able to challenge the value without the property owner can stamp. It will be interesting to see how that law evolves.

There are also other proposals being made to change how property taxes or property values are determined, rather than basing it upon a triennial revaluation, there are those who want to have the taxes lowered by saying that the auditor must look at the three year average value and adjust the values accordingly. Well, we will have to keep track to see how this legislation fares in the state legislature. The County Auditor’s Association has recently come out in opposition to some of those proposals. Property taxes are a significant burden upon individual property owners. It is also a significant burden upon commercial property owners. As the income tax in the state of Ohio, rates are being debated, that is, our reliance upon a progressive income tax system in Ohio is being challenged and small businesses are being granted exemptions from the state income tax for the first $250,000 worth of revenue. As we rely less upon the income tax, the question will become, will higher property taxes be required? What is fair to the average person, that will continue to be debated here in Ohio as to whether a progressive income tax is fairer, or whether we should rely more upon property taxes, which are generally considered to be more regressive, similar to a sales tax. But how we fund our state and local governments is critically important. Because after all, it is those governments that provide the most basic services, education, police, fire, sewer systems, water systems, all those basic services that all of us need. At some point, though, the amount of taxes on our real estate may become so high that it causes individuals to go into foreclosure. Certainly over the last five years, the amount of tax foreclosures that have occurred on our real estate here in Montgomery county, has gone up considerably.

Well, hopefully, today’s discussion of property taxes, you will find to be informative and hopefully, as you go about your business, and trying to analyze your own financial situation, you will understand that there are mechanisms by which if your property taxes gets too high, you can always file an appeal and present your case to the board of revision. Hope this is helpful. Hopped it provides some clarity and allows you to make some decisions with respect to how your property is taxed, and whether you do or do not want to file any kind of appeal. Thanks for being with me today. I look forward to seeing you in future podcasts. Thanks so much.

Until our next session, just remember the time to repair the roof is when the sun is shining. To get started with your estate plan, you can go to gudorflaw.com/gettingstarted. For a free copy of our recently published book called The Ohio Estate Planning Guide. Go to gudorflaw.com/book.

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