What is a property tax appeal?
A property tax appeal challenges the assessed or appraised value of your property, not the tax rate. The rate is set by the local taxing units, such as the county, city and school district. The value is set by the assessor or appraisal district, and that is the number you can contest.
Every state has its own name and process. Texas calls it a protest to the appraisal review board. Ohio calls it a complaint to the county board of revision. California calls it an assessment appeal to the county assessment appeals board. The process is fairly similar whatever the name: file on time, show evidence that the value is too high, and ask for a specific lower number.
How assessors value apartment buildings
Assessors value apartment buildings mainly with the income approach, checked against sales of similar buildings. The income approach divides net operating income (NOI) by a capitalization rate. Mass appraisal models use market rents, vacancy and expenses for the area, not your building’s actual numbers, so the result can miss what is really happening at your property.
Texas spells out the method in its Tax Code. Under Section 23.012, an appraiser using the income method must estimate gross income potential from comparable rental data, estimate operating expenses from comparable expense data and estimate cap rates from comparable data. Other states use similar methods, though the details sit in regulations and assessor manuals.
Errors usually come from a few places: market rent set above what units actually lease for, vacancy or collection loss set too low, expenses set too low and a cap rate that doesn’t match recent sales. Each one inflates NOI or the multiple, and each one is something you can prove with your own records.
Evidence that wins a property tax appeal
The strongest evidence is your building’s own operating history, presented in the same terms the assessor uses. Review boards hear from plenty of owners who complain but bring no numbers. Bring numbers. The Texas Comptroller notes that review boards decide on market conditions, not the owner’s personal finances, so keep the case about the building and its income.
- Trailing twelve-month operating statement (T-12) and the prior two or three years of income and expense statements.
- A current rent roll showing unit mix, in-place rents, lease dates, vacant units and concessions.
- Comparable sales of similar apartment buildings, with price per unit and cap rate where you can document them.
- Comparable rents showing what similar units actually lease for, if the assessor’s market rent is too high.
- Contractor bids, inspection reports and photos of deferred maintenance or physical problems.
- A recent appraisal of the property, or a purchase contract or closing statement if you bought recently.
- For an unequal appraisal claim, the assessed values of comparable buildings in the same district.
Property tax appeal deadlines by state
Property tax appeal deadlines are short and set by each state’s law, and missing one usually means waiting a year. Some states run from a fixed date, others from the day the value notice is mailed or delivered. Keep the notice of value and check it as soon as it arrives.
Here are three examples from state statutes. Your county’s dates and forms can differ inside a state, so confirm them with the assessor or review board.
| State | Where you file | Deadline | Source |
|---|---|---|---|
| Texas | Appraisal review board (protest) | May 15 or 30 days after the notice of appraised value is delivered, whichever is later | Texas Tax Code 41.44(a)(1) |
| Ohio | County board of revision (complaint) | March 31 of the following tax year, or the close of first-half collection if later | Ohio Revised Code 5715.19(A)(1) |
| California | County assessment appeals board | July 2 to September 15, or to November 30 in counties that don’t mail value notices by August 1 | Cal. Revenue and Taxation Code 1603(b) |
How to file a property tax appeal, step by step
The process follows the same basic steps in most states. Allow a few weeks for a large building; most of the work is pulling records.
- Read the notice of value and compare the market value to what the building would sell for today.
- Request the assessor’s file or income worksheet for your property, where the state allows it, to see the rents, vacancy, expenses and cap rate used.
- Build your own income approach from the T-12 and rent roll, using stabilized vacancy and a cap rate supported by sales.
- File the appeal or protest on the state form before the deadline, and keep proof of the filing date.
- Try an informal meeting with the assessor’s staff first. Many cases settle there.
- If it doesn’t settle, present your evidence at the board hearing and ask for a specific value.
- If the board’s decision is still too high, look at the next level. In Texas, that can be district court, binding arbitration or the State Office of Administrative Hearings, depending on the value.
Worked example: appealing the value of a 40-unit building
A 40-unit building is valued by the appraisal district at $8,000,000. The combined tax rate is 2.1%, so the tax bill is $168,000 a year. The owner’s T-12 shows NOI before property taxes of $602,000.
Appraisers often handle taxes with a “loaded” cap rate: they leave property taxes out of the expenses and add the effective tax rate to the cap rate. With a 6.5% market cap rate plus the 2.1% tax rate, the loaded rate is 8.6%. Dividing $602,000 by 8.6% gives a value of $7,000,000.
If the board accepts $7,000,000, the tax bill drops to $147,000, a savings of $21,000 a year. For a seller, that matters twice. The lower tax line raises NOI by $21,000, which is worth about $323,077 of value to a buyer using a 6.5% cap rate, as long as the buyer expects the lower value to hold after the sale.
| Item | District’s value | Owner’s income approach |
|---|---|---|
| NOI before property taxes | Not used | $602,000 |
| Loaded cap rate (6.5% + 2.1%) | Not used | 8.6% |
| Assessed value | $8,000,000 | $7,000,000 |
| Tax at 2.1% | $168,000 | $147,000 |
| Yearly savings | $21,000 |
Can you appeal for unequal assessment?
Yes, in many states you can argue that your building is valued higher than similar buildings, even if the value is close to market. Texas makes this a separate ground. Under Tax Code Section 41.43(b), an unequal appraisal protest is decided for the owner unless the appraisal district shows the property is appraised at or below the median of a reasonable number of comparable properties, appropriately adjusted.
Equity claims work well for apartment buildings in areas where the district’s values lag the market unevenly. You need the assessed values of comparable buildings, which are usually public records.
Does a sale price affect your assessment?
Yes. A recent arm’s-length sale is often the best evidence of value, and in some states a sale resets the assessment outright. California is the best example. Under Proposition 13, a change in ownership triggers reassessment to current market value, and Revenue and Taxation Code Section 110(b) presumes the purchase price is that value unless the assessor proves otherwise by a preponderance of the evidence.
Ohio treats a sale differently. A recent arm’s-length sale is one of the exceptions that lets an owner file a new complaint during the same interim period. Within two years of a sale, a local legislative authority or another third party may also file to raise the value when the documented price beats the tax-list value by at least 10% and a minimum dollar amount.
For sellers, the takeaway is that buyers underwrite the taxes they will pay after closing, not the taxes you pay today. If your state reassesses on sale, a buyer will model taxes on its purchase price. A successful appeal still helps, because it proves the building’s real income and keeps your holding costs down until you sell.
How a property tax appeal fits into selling an apartment building
Property tax is usually one of the biggest lines on an apartment building’s expense statement, so it moves NOI, cap rate math and DSCR more than most items. A lower assessment raises cash flow while you own and can support a better price, especially in states where the value doesn’t reset on sale.
Use the property tax calculator to estimate your bill at different values, and see our state property tax rate pages, such as the Texas property tax rate page, for local context. If you are close to a sale, ask your CPA how any refund is split between you and the buyer, since prorations at closing are based on the bill in effect.
Selling your apartment building to Skyline
Skyline Capital Investments buys apartment buildings with five or more units across the country. We underwrite property taxes the way they will actually be billed after closing in your state, so there are no surprises late in escrow.
We can buy for cash, offer seller-carry terms or work within a 1031 exchange timeline. Send the address and unit count through the form on this page or call (469) 660-2977. We typically respond within 48 hours.
