Ep. 187 | The Untapped Power of Property Tax Reviews

Welcome to Episode 187 of the Teaching Taxable Podcast. Hosts John Tripolsky and Chris Picciurro, along with guest Pat Gately from Leyton, jump into the often-overlooked area of property tax reviews. Many property owners view their tax assessments as unchangeable, but this episode reveals that reviewing and contesting them for accuracy can lead to significant tax savings. Pat shares his expertise, guiding listeners through the essential processes and methodologies required to ensure fair property tax evaluations.

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Creators and Guests

Host

Chris Picciurro

Founder, Teaching Tax Flow

Host

John Tripolsky

VP of Marketing, Teaching Tax Flow

Guest

Pat Gately

Strategic Development Associate, Leyton

What is Teaching Tax Flow: The Podcast?

Welcome to “Teaching Tax Flow: The Podcast”, the show that’s all about demystifying taxes and helping you keep more of your hard-earned income in your pocket.

Hosted by tax experts from the Teaching Tax Flow team, this unfiltered (but clean) podcast is designed to empower you with the knowledge and tools you need to confidently navigate the world of taxes. We’ll cover everything from understanding tax laws and regulations to maximizing deductions and credits.

In each episode, we’ll break down a specific tax-related topic in a clear and accessible way, providing practical tips and strategies you can use to optimize your tax situation. We’ll also answer listener questions, share the mic with amazing guests, and share real-world examples to help illustrate key concepts.

Whether you’re a freelancer, small business owner, real estate investor, or just looking to understand your taxes better, this podcast is for you. So tune in, take notes, and start building your confidence in taxes today.

Produced and hosted by Teaching Tax Flow.
www.TeachingTaxFlow.com

John Tripolsky: 00:03

Hey, everybody. And welcome back to the Teaching Tax World Podcast today, episode 187. We are diving into something that we refer to as the property tax review. So I'm sure that you are very positive what property taxes are, but did you know you can actually review those for a very, very special word called accuracy? So Chris Picciurro, welcome back to your own show, sir.

John Tripolsky: 00:25

Know we have a great guest today you're gonna introduce and really walk us through this. And I'm interested in it because a lot of people think like, Hey, I got an assessment. I'm stuck with it. That is what it is. And that actually is not the case.

John Tripolsky: 00:36

Absolutely.

Chris Picciurro, CPA: 00:38

Great to be back. I'm really excited to bring a special guest on. And, John, you know you know this very well that in our private EPA practice, we work with some implementation partners and some some companies to get our clients the best result possible legally legally and ethically. And once in a while, we can bring these folks on so that, all of the podcast listeners and viewers have access to that knowledge. So that's that's that's very exciting for me.

Chris Picciurro, CPA: 01:09

And remember, when we talk about reducing the tax you pay over your lifetime, that's not always income tax. Everyone thinks of income tax, property tax. Many more people pay property tax than income tax. And so we're gonna talk about property taxes, the property tax review process, and how it all works, with our special guest, Pat Gately from Layton. And Pat has been on our YouTube channel previously, but I Pat and I have worked together on, clients within our private CPA firm, and and he's kind enough to lend us some some knowledge and be available to the teaching tax flow community.

Chris Picciurro, CPA: 01:51

Pat, welcome to the podcast. How are you doing, buddy?

Pat Gately: 01:54

Doing really well. Thank you for having me, Chris. Pleasure to be back and and see you again. You as well, John. Yeah.

Pat Gately: 01:59

Really excited to kinda dive into property tax today. As you just kinda mentioned, everyone thinks of of income tax. Right? And typically, the three main taxes that are thought of, income, sales, and property tax. And and something unique that we find is that 75% of c suite executives do not manage their property tax burden as they would other operating expenses.

Pat Gately: 02:24

So I'm kinda excited to talk about how we can kinda get those in the same buckets, kind of reduce that burden for clients and and get them a review to, as John said, make sure their assessed, values are accurate.

Chris Picciurro, CPA: 02:40

Absolutely. We're gonna start with the we're gonna start talking through that assessment process, and and we will touch on a little bit later in the episode, how a reduction of property tax, one, puts more money in your pocket when you have income producing property. But two, as you know, different than, like, a primary residence where the appraisals are based on comps. A lot of commercial property, a lot of income producing property is based on what's called a cap rate. So if you can reduce those operating expenses and increase your ROI, it's actually gonna increase the value of those type of properties.

Chris Picciurro, CPA: 03:13

But before we get into that, can you talk walk us through typical property tax assessment process for for a for real property?

Pat Gately: 03:23

Yeah. So when that's a great question, Chris. And I wanna start by making sure we delineate assessment value versus market value. Because the assessment value is what counties use, and it's a market value at a specific point in time. So typically, a year in the rear or when you're reviewing your property tax assessments.

Pat Gately: 03:55

And the market value is an agreement between a buyer and a seller at a, like, negotiated price. So that can change at any on any given day depending on the value. So I wanted to make that really clear because the assessed value is what the counties are using and applying a property tax rate against to get your property taxes. So it's really important that we look back and get an understanding of what the life of the property is like, understand the full scope of the property, if there have been any changes to their property recently, like if they made any renovations, has there been any shifts in in occupancy or lease, Any changes in capital expenditures or net operating income without reviewing property taxes previously? Those are kind of the key things we want to get an understanding of when we first start.

Pat Gately: 04:58

And then from there, there are a couple of different approaches that that we can use to, identify if the assessed values is fair and then continue on with, an appeal if

Chris Picciurro, CPA: 05:13

So similar to if you receive a notice from the IRS, the most common notice is called the CP 2,000. That's a matching notice. Meaning, hey, what you put on your tax return isn't matching what the IRS has on on their transcript for you. Many times IRS is actually incorrect or they just don't have all the information. Just because someone gets an assessment for their property doesn't necessarily mean that they have that that that's just gospel, right?

Chris Picciurro, CPA: 05:40

They have the right to review that. Where do these property tax assessments come from?

Pat Gately: 05:47

Yeah. Great question. So when when the county is assessing the property tax, there's over 3,100 counties in The US that are doing property tax assessments on a yearly basis. So really understanding. They don't have all that amount of.

Pat Gately: 06:09

They don't have an abundance of time to get those assessments out. So they're using kind of whatever is quickly available to get an assessed value. They're most likely just putting out a property tax rate based on zoning and kind of what it looks like in a certain area, which it could have changed over the past few years. Maybe they're not updated on new zoning changes that happened in the past five months. All sorts of different things can happen within their assessment timeline.

Pat Gately: 06:41

And they're trying to get, again, 3,100 counties, every property, residential, commercial, every single piece of property gets an assessment every year. So for them, it's just a lot of work and a lot of time that they don't have to be able to really make sure they're accurately doing this for every property. And that's why taxpayers reserve the right to have an appeal and negotiate with the county and say, hey, I don't think you had all the right information. Here's what the full story is. Here's where where like, do we actually fit it?

Chris Picciurro, CPA: 07:19

Right. Right. So that no. That that you're right, because you're they're kind of throwing stuff against the wall a lot of times, maybe trying to balance budgets, maybe just painting with a broad brush as far as, okay, it's just gonna be the x amount delta or a change. And that might not be accurate.

Chris Picciurro, CPA: 07:37

Right? Because there could there could be a variety of factors. So someone gets their assessment, you know, their property tax assessment. How do they go about appealing it? Is there typically a a and I I know you said there's thousands and thousands of different municipalities, so there's different rules for every every county in The United States.

Chris Picciurro, CPA: 07:56

But in general, what you know is do they do they mail a letter in? Do they set up a time? Do they, you know, what's what's kind of the next step typically?

Pat Gately: 08:05

Yeah, great question. So after they get that assessed value from the county, that assessment notice, then they would want to contact somebody like our team here at Leighton and we then get into some of the methodologies into how property value is determined. And there are two that we use most commonly, the income approach and the cost approach. And the income approach is far off in the one used over the cost approach in these valuations to determine the property value. And properties completed on the income approach are are valued based on their generating their income generating capacities.

Pat Gately: 08:49

Right. So how much income is the property bringing in? And then specifically for multi families, we also will do a direct comparison approach, making sure if there's other similar properties in the area, we use those references and those comparable property tax rates to build our case for when we go to appeal. So go ahead.

Chris Picciurro, CPA: 09:15

So someone someone disagrees with their assessment. They build a case. Either they try to do it on their own or they can they can work with a professional firm. They get to they get in front of someone, right? And and let's say let's say they win.

Chris Picciurro, CPA: 09:29

And I know we were talking in in in our previous dealings, you know. Let's say they can get a 10% reduction kind of. I don't wanna say rule of thumb, but, know, it could vary, obviously.

Pat Gately: 09:39

Yeah. Typically, we see about eight to 12% reduction in in property tax. So I think a 10% average is is a totally fair number.

Chris Picciurro, CPA: 09:49

Cool. So if they get a 10% reduction. Can they know a couple of things are at play, right? Because now they have a new assessment moving forward, which that's huge, right? That's going to be tax savings.

Chris Picciurro, CPA: 10:02

Ultimately, you know, indefinitely in theory. Is there any way to go backwards and and reclaim any prior tax paid, or is this something that they that a taxpayer just looks forward and says, hey, I've got a savings moving forward?

Pat Gately: 10:17

That's a great question, Chris. And with in looking back something that that we that we typically pair a property tax review with, as you're familiar with, is a cost segregation study to make sure all the assets within the property were valued correctly and we have the proper valuations on those assets as well. While there isn't a retroactive refund, I guess, claim ability on property tax, to your point, it's immediate reduction in operating expenses, which in turn increases their NOI, and as you mentioned, the cap rate with the market value as well. So it it there is no look back, but it's an immediate impact in reduction of operating expenses. And as you said, hopefully indefinitely moving forward, because when we do something like this, the county gets put on notice saying, hey, we have someone, a professional, reviewing our assessed values every year to make sure that we're good to go.

Pat Gately: 11:29

And then the county pays a little bit more attention, does their due diligence a little bit deeper to make sure they're finding the appropriate assessed values and applying an appropriate property tax rate to the property. So if there are any other opportunities where they think they might be increasing your property tax, you're already engaged with us and we can go back and say, hey, guys, what are we doing here?

Chris Picciurro, CPA: 12:01

Right. Right. And as far as are you seeing any types of properties or property classes that are seeing the best outcome from a from a property tax, you know, review. And and who knows? Someone might go through a review and and it's a fair assessment.

Chris Picciurro, CPA: 12:22

And and now you at least feel you feel good about where you're at. It's not exactly. No harm, no foul there.

Pat Gately: 12:26

Exactly. Because we're all success based. Like, we don't charge any fees unless we get you a reduction in property taxes. So that's one of the nicest things about working with Layton. With types of properties, the types of properties that I would specifically call out are like retail properties, office buildings, multifamily, which I just touched on and also leveraging the DCA direct comparable approach with it.

Pat Gately: 12:56

And then also hotels. Like those are kind of the big groups, I would say. We see a lot of opportunities for property taxes are typically the properties that are also generating the most income, whether they're strip malls or box stores or different enclosed malls, street front stores, all types of things that just kind of have a natural flow of traffic in front of them on a day to day basis. We typically see that that has some sort of an impact on the assessed value because the income is a little bit higher because of the foot traffic.

Chris Picciurro, CPA: 13:33

And from the time someone gets their assessment, just in general. I know it's you know, this is when people ask me, how long does what's the turnaround time for a tax preparation? Like, it depends. Are you organized? How many documents do we have?

Chris Picciurro, CPA: 13:47

Are we waiting on things from other people? But just kind of rule of thumb, from the time someone gets the assessment, let's say they do put together an, you know, they realize that it's not fair, as John said in the beginning, and they do put together an appeal. What's the typical decision timeframe from the taxing authority? As you know, in teaching tax law, we say tax agencies are your involuntary business partner. In this case, every county is a tax agency.

Chris Picciurro, CPA: 14:14

They are assessing a tax on your property. How what's the typical lead time from the tax agency to reply to to To a taxpayer appeal.

Pat Gately: 14:24

I mean, as you well know, it can vary depending on the county, but in average time, say about like a couple of weeks, It depend. It really kind of also depends on when their appeal deadlines are. If it's much closer to their appeal deadline, they probably have more people reaching out. So they'll probably be longer to reply. But if it's a few months in advance or six months out or right when you get your assessment and you have a year until the deadline, they're much more responsive.

Pat Gately: 15:03

They're not really that busy at those times because they they just finished assessments from the previous year.

Chris Picciurro, CPA: 15:12

And that's a good point. This isn't an income tax. We're not on a calendar cycle where, you know, you know, the original filing date's April 15 for personal returns, but you could easily extend October or s corps and partnerships, March 15, extend to September. You know, we are on a kind of a rolling cycle. So when you get that assessment and if you think it's it's unfair, that's the time to start taking action and and and, to reach out.

Chris Picciurro, CPA: 15:39

And and if you do and you do have an assessment, you have a question, absolutely drop a comment here on our YouTube channel. Maybe you've gone through a property tax. I, you know, Pat, I was talking to a couple of our clients in our private CPA practice, one of which just got a 20% reduction, on some commercial property. He's thrilled. So, yeah, if you you've gone through that process, we'd love to hear from you and drop a comment.

Chris Picciurro, CPA: 16:01

We do reply to all the comments, you know, because this is something that, again, I I truly believe more no more taxpayers pay property tax than income taxes. We do have a lot of people, let's say retirees, that really don't pay much income tax. Maybe they have Social Security and a small pension, but they own a property, for instance. And, again, the appeals process is typically gonna be geared towards income producing properties, but you could certainly probably do a self up you know, you'll probably appeal on a residential property on your own, as well. It's probably the same process, I would imagine.

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John Tripolsky: 17:13

Awesome, man. Well, I appreciate the insight at all. And really, I mean, that pretty much answers, like, you know, is the juice worth the squeeze?

Pat Gately: 17:18

Exactly.

John Tripolsky: 17:19

Is really what somebody has to figure out. So we appreciate you jumping back on, man. I know there's some other other videos that we've done that Chris mentioned is also on the YouTube channel, and, you know, we'll we'll have you back here, man. I know there's plenty of topics we can dive

Pat Gately: 17:30

into. Definitely.

John Tripolsky: 17:31

Appreciate your time.

Pat Gately: 17:32

I appreciate you guys having me back. Thank you, Chris. Thank you, John. It was wonderful being back on the Teaching Tax Flow environment this time on the podcast. Like John said, if you haven't checked out the YouTube videos, go check those out.

Pat Gately: 17:46

We've done a couple. One was the property taxes, Chris had mentioned when we started. And we also did one on refund reviews and grants as well.

John Tripolsky: 17:56

Absolutely. Alright, everybody. Well, we'll let you off the hook here. Go and look at your assessment and see what's if there's something you can do about it. And while you're doing that too, check out defeatingtaxes.com.

John Tripolsky: 18:06

Bunch of resources in there. And don't be lazy. Listen to Pat. He said it, not us. Go check out the YouTube channel and watch some of those videos.

John Tripolsky: 18:13

So as always, everybody have a great week. We'll see you back here next week on the teaching tax loan podcast.

Disclosure: 18:19

The information in this podcast is educational and general in nature. It reflects the opinions of teaching tax flow and does not take into consideration the viewer's personal circumstances. It is not intended to be a substitute for individualized financial, legal, or tax advice. Consult the appropriate qualified professional prior to making any decisions. Securities are offered and supervised through Cabin Securities Inc member, F I N R A S I P C.

Disclosure: 18:39

Investment advisory services are offered and supervised through Cabin Advisors LLC, an SEC registered investment advisor. Chris Picciurro is a registered representative of Cabin Securities and an investment advisor representative with Cabin Advisors LLC. Teaching Tax Flow is an independent entity and is not affiliated with Cabin Securities or Cabin Advisors.