The economic shutdown caused by the COVID-19 pandemic has caused great distress upon cashflows in many sectors. In this edition of the RETC Podcast, Amish Gupta, Managing Partner at RETC and Tim Feagans, Director at RETC, discuss how certain property tax strategies can help investors to protect their cashflows during this economic downturn. A summarized transcript as well as the audio podcast are available below.
What are the best ways to manage and maximize your cash flows relating to your property taxes?
Appeal Assessed Values
The most common and obvious way to reduce property taxes is to lower the assessed values. The key is to be as aggressive as possible. Pursue appeals even in instances where you may not believe there is a possibility for a reduction. There is nothing to lose. Look into second and third level appeal options when the first level does not go your way. Many times there are some costs associated with those higher level appeals. If pursued properly, those costs can have big returns in the long run.
Apply for Exemptions and Abatements
Another way to reduce your property taxes is to pursue and apply for exemptions and abatements. As a taxpayer, you must first know what is available. Then, you must comply and complete the applications correctly otherwise they will get denied. Engaging a property tax consultant or an attorney is critical for this part. The savings can be material, and it is worth spending the resources.
Manage Payment Timing
The last method has more to do with the timing of the payments rather than the amount of the payment. Once again, knowledge is key. Assessor/Collectors have various due dates across the country. They typically range from being quarterly to annual. If an owner misses a payment, there are usually penalties and interest assessed on the payments. If a payment becomes delinquent long enough, then a tax lien can be placed on the property.
If a taxpayer understand all the nuances for the payment schedules, they can use it to their advantage and pay as late as possible without incurring material penalties and interest while avoiding tax liens. Additionally, due to COVID, many Assessor/Collectors are revising their normal guidelines to reduce and sometimes eliminate those additional fees. A property owner in a dire situation may have the ability to push back payments without any major repercussions.
Additionally, if there is an open appeal or litigation, some states allow for the taxpayer to pay on a reduced amount based on what they believe the assessment to be. Once the appeal is resolved, then the amount is trued up (either the taxpayer paying the leftover balance or receiving a partial refund). At times, there are fees involved, but not always. Conceivably, a taxpayer could carry an appeal (typically litigation) out for years before any resolution and thus delay payment.
These are three ways to manage your property tax cash flows. Ultimately, it is worthwhile and strongly suggested to have an active discussion with your property tax consultant to determine the best way to minimize cash flows. You might just discover a way to help your returns and the financial health of your assets.
To learn more about how you can protect your cashflows during an economic downturn, please reach out to Tim Feagans directly at firstname.lastname@example.org.