Author: Terry, CPA @ Kabinet

Property tax can often be overlooked as it is typically rolled into your mortgage payment but it is a major expense each month for those of us that live in the Northeast. Read below as I delve into what exactly you are paying for and most importantly, how to REDUCE that bill!

What is property tax and what does the money go towards?

Property tax is the money paid by homeowners to the municipality (city, town, village, hamlet etc.) to fund services within the locality. Simply put, it’s a tax each that you pay to fund services in your neighborhood. Every area structures their tax differently but on a general level the vast majority of your property tax amount goes to running the schools in your district.

For example, on Long Island in New York (where I live), somewhere around 80% of my annual property tax bill goes to the school district. The remaining percentage funds the library, town community centers, garbage/recycling removal and other benefits but that is all outweighed by the schools.

People like to rant and rave about property taxes being extremely high and although I do not disagree, it is important to remember how expensive it is to run a school district. There are salaries for administrators, teachers and teaching assistants; buildings that get old and require repairs and upgrades; utility bills to pay; and so much more.

The library in your area costs a great deal of money to run as well – but that is one building with one set of staff and does not have the ecosystem that a school does! Property tax could be called a “School Tax” but that wouldn’t sound as beneficial as the more general term “Property Tax.”

Why does property tax seemingly increase every year?

The amount you pay in property tax is calculated through a complex formula that as laypeople we will never obtain access to. I do know that the amount you pay is based on the assessed value of your home (not the appraised value!) and then you are taxed on a percentage of this assessed value. People can get nervous when they see the assessed value of their property on the annual property tax bill but do not be alarmed as that is what your municipality believes your home is worth, not its fair market value if you were to list it for sale today.

Property tax seemingly increases each year because the cost to run your municipality does not often decrease. It is well known that government jobs provide many benefits and stable salaries which are paid for by the taxes you pay. In order for the employees in your company to receive cost of living raises, quality health insurance and other benefits the money must come from somewhere. This is no different than how the things you pay for have increased dramatically as the years have gone on.

What can I do to lower my property taxes?

There is something you can do to lower your property taxes and it is called Grievance. When you grieve your taxes (as it’s called) you petition your municipality for a reduction in property taxes because you believe they overvalued your property. This can be done with the help of an attorney or simply by filing the paperwork on your own.

Most homeowners overlook this and they miss out on huge savings! I personally use a tax grievance company to do it on my behalf and I pay them a fee ONLY if they save me money on my taxes that year. For many years now they have done an excellent job in keeping my property taxes as affordable as they can be. It is money well spent and I gladly pay them, as otherwise I would be paying the increase to my town instead.

Whether you are a new homeowner or have been living in your home for years like me you MUST grieve your taxes. I promise it will save you a lot of money!

What can I do to better budget for these increases?

The reality is your property tax is going to go up as the years go on. Our cost of living is constantly rising whether we like it or not so the best plan of action is to budget accordingly. Kabinet makes it incredibly easy to keep track of your annual property tax bills which can then be reviewed to estimate what the increase will be in the following year. Of course this varies depending on your municipality but uploading this piece of paper and keeping it in your Important Records folder will make it easy to review when you plan your spending for the year.

Are you already grieving your taxes? Do you pay a lot of property tax in your state? Let me know below in the comments or send me an email at to ask a question. I am always here to help!

Kabinet allows you to keep track of your property taxes and everything else for your home. Create your Kabinet Basic account today and explore our powerful platform now.

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