If you own property and are looking for back tax relief, the short answer is, there’s not a whole lot of help out there for you. The long answer is, there’s some help, but it may not be comfortable.
Today I’ll answer your questions about back tax relief, and the topics I’m going to cover are:
- Can You Get Property Tax Relief Via Bankruptcy?
- Can You Reduce Taxes Due to an Incorrect Property Evaluation?
- If You Can’t Get Relief, Sell the Property
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Can You Get Property Tax Relief Via Bankruptcy?
Bankruptcy is part of the US Constitution and codified in federal law. In some cases, it can provide back tax relief and wipe out past due property taxes. Sometimes it can’t.
Chapter 7 Bankruptcy
The legal advice website Nolo reports Chapter 7 can provide some limited back tax relief. “You can discharge your personal liability for property taxes that were payable (without penalty) more than one year before your bankruptcy filing. Keep in mind, though, that many counties attach a lien to your property upon assessment or one year afterwards,” states an article on the website.
Chapter 13 Bankruptcy
Chapter 13 allows you to keep property while working to pay off debts. That includes back property taxes. “In Chapter 13 your back property taxes would be repaid like your other debt obligations over the course of your mandated repayment program,” Jesse Campbell writes at the website Money Management International.
Bankruptcy Limitations
The important thing to remember with bankruptcy is, it takes care of just the taxes coverable when you file, and that back tax relief is limited.
Property taxes will continue to come due and will have to be paid going forward, regardless of what the bankruptcy does. The filing will not wipe out future taxes.
If the local tax collecting board has already filed a lien on your property for the taxes, Chapter 7 won’t affect that.
Chapter 13 may give you some additional time to pay the taxes, but total back tax relief probably won’t happen.
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Can You Reduce Taxes Due to an Incorrect Property Evaluation?
Property taxes are based on what the property is worth.
The tax office has staff or hires someone to review real estate to decide what it is worth. This is done by looking at the most recent sale of the property. That’s a solid valuation of the property and hard to challenge unless significant damage or other catastrophe has hurt the value of the home.
If the property hasn’t been sold in a while, the tax office will estimate the value by comparing it to similar property and sales of similar property.
Estimates can be wrong.
The Process to Appeal
Most real estate tax authorities have a process to appeal the value of the property. At the hearing, the homeowner presents his case of why the valuation is wrong, and the tax office presents its case.
If the hearing finds for the homeowner, the value is adjusted and the taxes are likewise adjusted. Back tax relief is possible, depending on the laws in that state. The amount due can be lowered.
Depending on what kind of homestead tax exemption the state has, it’s possible for a very inexpensive house to not have any taxes.
If You Can’t Get Relief, Sell the Property
If back tax relief is a necessity and there’s no other way to get help, sell the property. This is certainly better than having the property taken by the bank in a foreclosure or sold at a tax auction.
If the taxes are too high, selling the property can let you buy something less expensive or move to a place with a lower tax rate.
Short Sale
If the taxes are mounting, a short sale may even be possible. The short sale means you won’t make any more from the sale of the house, but it also won’t hurt your credit as badly as a foreclosure.
Conclusion
We hope you found this article on back tax relief helpful.
In summary, some possible options are bankruptcy, appealing the estimated value of the property, selling the property or initiating a short sale.
Bankruptcy may provide limited relief, but it will not wipe out future taxes.
As for property value, if it’s been a while since your property has been sold, the tax office will use comps to estimate your property’s value. If you believe the estimate is too high, you can contest it. A finding in your favor could reduce your property tax bill.
If all else fails, you could sell the property, or you could attempt a short sale.
A short sale occurs when your bank allows you to sell your house for less than you owe. However, if your home is worth more than what you owe on your mortgage, the bank will not approve a short sale.
Ted Thomas is a Florida-based author and publisher who specializes in tax deed and tax lien investing.
If you’d like to learn how to profit from tax defaulted real estate, which is sold at public auctions for 10, 20, or 30 cents on the dollar, or learn the secrets of tax lien investing to earn returns of 16%, 18%, 24%, and up to 36%, then get started today with the FREE Master Class.
Ted Thomas is the only one who provides full support and complete training with home study courses, Q&A webinars, live tutorials, workshops & web classes, and personal one-on-one coaching.
Ted Thomas is America’s Leading Authority on Tax Lien Certificates and Tax Deed Auctions, as well as a publisher and author of more than 30 books. His guidebooks on Real Estate have sold in four corners of the world. He has been teaching people just like you for over 30 years how to buy houses in good neighborhoods for pennies on the dollar. He teaches how to create wealth with minimum risk and easy-to-learn methods.
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