Money in Your Pocket - It's Real Estate Tax Appeal Season until April 1

Money HouseWant more money this year?  You may be entitled to a reduction in your property taxes due to a decrease in value in your property from general economic conditions.  Key points:

  1. You MUST file by April 1 

  2. You will need your real estate tax bill, and recent sales of comparable properties (try  

Got questions or need help? You can reach out to Steve Loeb, Esq. in our Tax Department.  I have added below some information about real estate tax appeals that Steve recently sent to our clients.

New Jersey mandates that an individual pay taxes based upon the fair market value of the property, not necessarily the assessed value.

The New Jersey laws governing tax appeals are found at N.J.S.A. 54:3 et. seq. and N.J.S.A. 54:4 et. seq. and N.J.A.C. 18:12A et. seq.

Property Taxes are the result of the local budget process and it may not necessarily be appealed, but the property tax assessment may be. A taxpayer considering an appeal should understand that he or she must prove that his or her assessed value is unreasonable compared to a market value standard.

According to New Jersey law, the current assessment set is assumed to be correct. The ability to overcome this presumption of correctness to obtain an assessment change is based upon fair market value.

In essence, an assessment is an opinion of value by a licensed professional. For an assessed value to be considered excessive or discriminatory, it must be proved that the assessment does not fairly represent one of two standards:

1. True Market Value Standards
2. Common Level Range Standard

In 1973, the New Jersey legislator adopted a formula known as Chapter 123 to test the fairness of an assessment. Once the tax board determines a property’s true market value during an appeal, they are required to compare true market value to the assessed value. If the ratio of assessed value to true value exceeds the average ratio by 15% the assessment is reduced to the common level.

In this time where assessments may be not in line with current market value standards, if you should have any questions or need assistance in filing a real estate tax appeal, please feel free to contact Steve Loeb, Esq. in our Tax Department.

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Tax Benefits Stay with Life Estate Owner

Will your taxes change if you make a gift of real estate subject to a life estate over a straight gift of real estate? Guest blogger  Stacey Crowell Maiden, Esq., Of Counsel to our Trusts and Estates and Elder Law Practice Group provides an explanation of this common, but non-intuitive planning technique.

In our estate planning and elder law practice, we sometimes incorporate the use of a “Life Estate Deed” to transfer real property.. Under a Life Estate Deed, the “life tenant” retains 100% of the present interest of the property. The future interest (which is defined as the full interest after your death) would be transferred to the “remainder persons.” When retaining a Life Estate in the property, you are not transferring or giving the entire interest in the property away. Instead, the remainder persons are given today the right to own the property after you pass away.

The life tenant is responsible for the payment of real estate taxes on the property. However, the Municipal Tax Office - on receiving a copy of the recorded Life Estate Deed from the County Clerk – will update its records, listing the remainder persons as the owners, which means the tax bills are then sent in the names of the remainder persons. This can be a source of confusion and concern for our clients, particularly as to whether they will lose any tax benefits related to ownership.

Guidance is found in the Internal Revenue Code and Regulations, New Jersey Statutes and the New Jersey Administrative Code to assure our clients that as life tenants, they continue to receive certain tax benefits provided to owners in New Jersey.

For example, life tenants retain the Income Tax Deduction for Real Estate Taxes. As the owner of the property by virtue of the life estate, a life tenant may continue to deduct the real estate taxes he pays on his federal income tax return. (I.R.C. §164(a); Reg. §1.164-1(a).

And, by reserving a Life Estate and paying the real estate taxes, the life tenant is entitled to continue to receive the New Jersey Homestead/New Jersey Saver Rebate (N.J.S.A. 54:4-8.58; 54:4-8.58a; 54:8.59); the Senior Citizen's Deduction (N.J.A.C. 18:14-1.1 and N.J.A.C. 18:14-2.8); and the Veteran's Deduction (N.J.A.C. 18:27-2.10).

Of course, there are other potential taxes (e.g. capital gains taxes) to be concerned with when transferring property pursuant to a Life Estate Deed, but the above tax benefits related to present ownership of the property remain in place for a life tenant who pays the real estate taxes.

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Real Estate Tax Appeals - Filing Thresholds have Changed for 2010

Real estate tax appeals for both commercial and residential property have been a hot topic.  As the real estate market sinks, many taxpayers find that they are paying taxes on real estate due to assessments made when the value of the property was 20-40% higher.

Up to now if you wanted to file a tax appeal and property assessed up to $750,000, you would have had to have filed in the County Board of Taxation.  Now, they have changed the law so that property assessed up to $1 million must also be filed at the County Board of Taxation. 

The fear is that self service taxpayers will be unaware of the change, file in Tax Court, and then miss the filing date on the county level.  There is no "oops" defense to  missing the filing deadlines.

The law change took place in an amendment to Rule 54:3-21 through Assembly Bill 4313.  The stated purpose of this change in law is to "decrease the overburdened Tax Court's caseload and allow these cases to be heard by county boards of taxation...".

Again, the critical issue is that if a person files a tax appeal in the wrong jurisdiction, you may be considered out of time to then re-file in the correct court of competent jurisdiction.

Specific questions on real estate tax appeals can be directed to my colleague Steve Loeb, Esq. in our Tax Department.

Image: Salvatore Vuono /