By Will Raines, Esq. of Evans Petree PC
Benjamin Franklin has been credited (dubiously) with the saying, “in this world nothing can be said to be certain, except death and taxes.” The Greek philosopher Heraclitus has been credited (also dubiously) with the saying, “the only constant in life is change.” To synthesize dubious quotes from two brilliant minds, “you will certainly have to pay taxes, and they will constantly change.”
With property tax bills subject to constant change, property owners hoping to predict and plan for future tax liability have their work cut out for them. Here are the chief factors taxpayers should consider in tax planning:
Track reassessments
Governments base property taxes on two things: assessed value and tax rate. Both elements change on a regular basis, and it can be mind-boggling for taxpayers to stay on top of just exactly when and by how much their properties’ taxes will increase.
Reappraisal systems vary. While most jurisdictions reappraise either annually or on a regular, multiyear cycle, some jurisdictions do not. Famously, California’s Proposition 13 requires reappraisal based on changes in ownership and other triggers, rather than on any regular cycle.
A jurisdiction’s reappraisal history is no guarantee of its future cycle. For example, the Arkansas Legislature amended its reappraisal statute in 2023, transitioning from counties being on either 3-year or 5-year cycles to mandated 4-year cycles for all. However, even this information is not enough to know when a particular county’s next reappraisal will be, because the transition will be phased to reach a substantially equal number of counties reappraising each year.
Various variables
While knowing the jurisdiction’s reappraisal cycle is important, the taxpayer’s team has many other local rules to follow, including potential caps on annual increases. For example, in Alabama, which reappraises properties annually, the legislature recently capped annual increases at 7 percent, effective in tax year 2025.
Once the taxpayer knows a jurisdiction’s reappraisal cycle and methodology, there is still the question of how much assessed values will change from one reappraisal to the next. For jurisdictions that have longer cycles, value changes can be drastic.
For example, Tennessee assessors reappraise properties on a cycle of four, five or six years, depending on the county. Nashville, one of the fastest-growing cities in the country, will undergo a reappraisal this year, the first one in four years. Based on the exponential growth that has occurred in that interim, property owners will likely experience sticker shock once assessments come out in May.
Across the United States, all taxpayers receiving revised assessments in 2025 face uncertainty about how current events will affect new valuations. How President Donald Trump’s election and initiatives will affect the real estate market is unclear.
The Federal Reserve reduced the fed funds rate three times in 2024 after more than a year of tightening, but the future impact of their tinkering is uncertain. Office market fundamentals have deteriorated to an alarming degree, and multifamily transaction volume has slowed from a firehose blast in 2024 to a trickle today. Will the assessors of America take macro-economic changes into account, or will they fixate on conditions in early 2022, before interest rate hikes and the decimation of the office market?
Rate watch
After assessors establish taxable value, taxpayers still face the question of the tax rate. Rates can change in any year, whether there is a reappraisal or not. However, one important thing to know about any jurisdiction undergoing a reappraisal is whether it has a truth-in-taxation law.
These laws aim to ensure transparency by requiring local governments to inform taxpayers in advance about potential increases. Tennessee, for example, requires local governments in a reappraisal year to certify a tax rate that will result in revenue remaining neutral, or equal to the previous tax year’s revenue. Then, if leaders wish to increase the tax rate to generate more revenue than the prior year, they must take a separate vote later.
Typically, values increase greatly in the reappraisal and the tax rate plummets to generate neutral revenue, due to the truth-in-taxation law. This prevents local governments from obscuring a potential tax windfall following reappraisal, because they must vote to increase the tax rate before anticipated revenue can exceed the neutral amount.
In the end, every jurisdiction is different. Staying on top of a portfolio’s upcoming reappraisals requires the taxpayer or their advisors to understand and follow a host of variables, from the reappraisal cycle to potential caps, exemptions, truth-in-taxation laws and more. A seasoned, local advisor can help property owners understand current laws, monitor proposed changes, maintain relationships with local assessors and identify the most effective strategies for limiting potential overassessments due to reappraisals in each property’s jurisdiction.
Will Raines is a shareholder in the Memphis law firm of Evans Petree PC, the Arkansas and Tennessee member of the American Property Tax Counsel, the national affiliation of property tax attorneys. He can be reached at wraines@evanspetree.com.