Archive | May, 2015

Protest Alternative: Hiring a Property Tax Consultant

28 May Property Tax Appraisal Protest

Note: the information below is definitely Texas-specific, and possibly county-specific – so please take caution when applying it to your local area!

It’s that time again – property tax appraisal season.

Last year we shared Corey’s first-timer experience protesting our property tax appraisals (and saving $1,454) for two rental properties:

  1. Received Appraisal Notice, Reasons to Protest
  2. Filed Notice of Protest, Requested Appraisal District Documentation Letter
  3. Compiling the Evidence
  4. Informal Meeting & Outcome

A recent article by the Austin American-Statesman analyzed Travis County’s 2014 tax season: 74% of all protests resulted in reduced appraisal value, but once you account for withdrawn protests then 97% of those who completed the protest process saved money.

But I also accept that some property owners simply aren’t going to represent themselves. Maybe you’re busy, intimidated with the process, or don’t think the hassle is worth the benefit.

Property Tax Appraisal Protest - Agent vs Self Representation

Fair enough, but the good news is that many of you probably have access to a convenient and cost-effective alternative – hiring a property tax consultant.

What does a property tax consultant do?
A coworker told me about a service that handles his protests on a contingency basis – i.e. he only pays if they save him money. I’m sure the average homeowner is capable of doing it themselves, but consultants have the time, expertise, and data to navigate the protest system for you.

Call me naive, but I didn’t even realize this industry existed. I did a little research and found if they do lower your appraised value they get a cut of the tax savings – I’ve seen anywhere between 33-50% depending on location. That might sound like a lot, but remember you were going to pay more than that in taxes if you didn’t protest at all.

Property Tax Appraisal Notice

Using last year’s numbers as an example, we would have saved $1,454 in taxes and paid $480-$727 to the consultant for a net gain of $727-$974. That’s no chump change. Of course if you ARE willing to protest your own taxes you can pocket that consultant fee, but it’s a win-win either way.

Find one by searching your city or county name + phrases like:

  • Property Tax Counselor
  • Property Tax Consultant
  • Property Tax Consulting
  • Property Tax Professional
  • Property Tax Representation
  • Property Tax Appeal Service
  • Property Tax Service
  • Property Tax Agent

Sometimes the property tax consultant saves my coworker money and sometimes they tell him he doesn’t have a good case this year – either way he doesn’t pay anything unless they get a reduction.

If you’re tempted to try this for yourself, don’t delay – I know the deadline for our county is June 1st, which is right around the corner!

“A penny saved is worth two pennies earned . . . after taxes.”  -Randy Thurman

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Recent Reading: Income Taxes Explained in 100 Pages or Less

5 May

Note: this post uses referral links, but I was not asked to read this book. You don’t have to use our links, but we’re very grateful when you do!

Inspired by the recent tax season, a solid recommendation from Afford Anything, and the impressive tax savings by Root of Good, I set out to better educate myself on the US tax system. Lately I’ve had this nagging doubt about whether I should be taking more proactive steps to minimize my income taxes… somehow.

To that end, I picked up “Taxes Made Simple: Income Taxes Explained in 100 Pages or Less” and was immediately in love with the concept. What a great way to get a basic foundation about an otherwise complicated and intimidating topic. I’ve filed my own taxes before (though not since our first rental property), and even then only with the prompted assistance of online tools like TurboTax.

Bonus: at the time of this writing this book was FREE as a part of the Kindle Owners’ Lending Library – which allows Amazon Prime members to digitally “check out” books on Kindle devices.

My Personal “Aha” Moments:

  • Source of Income Matters, A Lot – I never appreciated how much a dollar of earned income ≠ a dollar of self-employment income ≠ a dollar of qualified dividend income ≠ a dollar interest income. I don’t know if there’s anything I’m going to do differently with this information, but I do now understand why some think the game is rigged!
  • Above-the-Line vs. Below-the-Line Deductions – I already knew this was relevant to the home mortgage interest deduction, but I gained more clarity on how all the parts fit together. I suspect many people claim deductions that offer no tax benefits whatsoever and don’t even know it.
  • The Disappearing IRA Deduction – While contributions to a traditional IRA do not have an income cap, the valuable above-the-line deduction does (IF you or your spouse have access to a retirement plan at work). I consider myself pretty retirement account savvy and I had no idea.

This material should be required reading in high school, and this particular book will now join Suze Orman’s “The Money Book for the Young, Fabulous & Broke” as my default graduation gift (I know, I’m fun at parties too).

Income Taxes

(photo by Alan Cleaver)

Our key takeaway is to reconsider our above-the-line deductions, specifically traditional IRAs and HSAs. On one hand, we’re hesitant to reduce our tax exposure at the cost of tying up our money until retirement age – money that could otherwise be invested in rental properties. Still, this could definitely be useful if we find ourselves at risk of getting phased out of Roth IRA eligibility and want to take proactive measures to reduce our AGI.

I sure hope the author writes a rental property-specific book someday. Eventually I’ll also check out “Independent Contractor, Sole Proprietor, and LLC Taxes Explained in 100 Pages or Less” from the same author. LLCs and rental properties seem to go together like peanut butter and jelly, but I still have a lot to learn before I’d be comfortable committing.

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