What you need to know about property taxes in Massachusetts

Buying News
The Boston Globe

Massachusetts’s cities and towns seek to increase or decrease tax rates on all forms of property every January. You might notice the change on your tax bill, but here’s a look behind the process:

Property taxes: What are they?

A property tax is a tax on real estate, assessed by local government. The tax is generally based on the value of the home itself and the land it sits on.

Who pays them?

Property owners!

Who decides what the tax rate will be and how?

In Massachusetts, the boards of assessors in each city or town assess property taxes on all taxable personal and commercial property in their communities. Depending on the area, the assessors are either elected by the public or appointed by local governing bodies.

The tax rate is determined based on the spending of the town meeting or of the city council. If the town meeting spends less, the taxes will probably drop. If they spend more, the taxes will likely go up. Based on the spending, the assessors recommend that the selectmen or the city council set a certain tax rate. The assessors’ primary job is to make sure that the taxes (to support the town’s spending) are fairly allocated to each person and property in the town.

What do they pay for?

Property taxes are a very important source of revenue for the 351 cities and towns in Massachusetts. They help fund things like education, transportation, libraries, parks and recreation, and emergency services (think snow removal).

The boards of assessors have an annual hearing on the town or city’s budget to determine the amount of money needed so the local government can cover its expenses for the year. Towns with higher property taxes often spend more on things like education and public services. Or, they might have higher priced homes, according to CNN Money. Or they may be higher simply because the local government isn’t bringing in other major sources of revenue. Towns with the lowest property tax bills usually have a small population with a large commercial or industrial base, according to a study done by the Tax Policy Center.

How are they calculated?

Property taxes are calculated by multiplying your city’s tax rate by the assessed value of your property and all the structures on it. In Massachusetts, tax rates are expressed as the number of dollars per thousand dollars of assessed value. So if a home is assessed at $100,000 and the tax rate is $25 (.025), the tax bill is $2,500.

How is the value of my property determined?

The three approaches traditionally used to value property are the cost, market, and income approaches, explained below.

The Cost Method

The assessor determines what it would cost to replace the property.

The Income Method

The assessor determines how much money the owner would make from renting their property.

The Market Method

The assessor looks at market data and compares the property with what other homes in an area are selling for. Typically, they take into account the location of the property and the overall state of the property. Taxpayers should look at recent sales of houses in their neighborhoods and compare the features of these properties with their own in order to estimate their home’s fair market value.

It’s up to the individual assessor to weigh the strengths and weaknesses of each approach to decide on which valuation method to use. The assessor also decides the “fair cash value,’’ which is the price a willing buyer would pay to a willing seller for a specific piece of property.

When are property values calculated?

The assessment date in all cities and towns in Massachusetts is the January 1 prior to the beginning of the fiscal year (FY) for which the tax is assessed. For example, for FY 2016 (July 1, 2015 to June 30, 2016), the assessment date is January 1, 2015.

How often do you pay property taxes?

Cities and towns in Massachusetts issue tax bills on a quarterly basis. The bills are sent 30 days before they are due.

So, your property tax bills will be mailed four times per year: July 1, October 1, January 1, and April 1.

Why did your property tax just go up?

If you suddenly add an addition to your home, or implement any other type of major improvement, the value of your home can change dramatically. But any new additions, demolitions, improvements, or alterations that occur after the assessment date for FY 2015 (January 1, 2014) would not be reflected in assessing records until January 1, 2016.

Can your property tax be contested?

Yes. You can call your local assessor’s office to ask about the review process if you think your property was valued incorrectly, but the first step for a taxpayer to protest his or her assessment is to file an abatement application.

An abatement is a refund of a property tax payment based upon a reduction of the assessed value of the property. Abatements are granted for overvaluation, disproportional assessment, improper classification, and statutory exemption – basically, if the assessed value of your property did not represent the fair cash value.

Keep in mind that abatement applications are due by the third quarter tax payment due date, so February 1 for FY 2015.

And if you’re unhappy with the decision of the assessing department, you can file an appeal with the Appellate Tax Board, a state agency that hears appeals of decisions of local boards of assessors with respect to abatements.

What is the statewide average property tax in Massachusetts?

For a single-family home in the Bay State, property owners can expect to pay $5,120 in 2015, an increase of $76 over last year’s average bill, according to data from the state Department of Revenue.

In Massachusetts, a state regulation called Proposition 2 ½ allows cities and towns to raise the total amount of taxes they levy by no more than 2.5 percent each year.

Where are the lowest and highest property taxes in Mass.?

As of FY 2015, Weston had the highest average single-family tax bill of $18,059. Sherborn ($14,720), Lincoln ($14,367), Dover ($13,715), and Wellesley ($13,326) also had high average single-family property tax bills. Hancock, a town in Berkshire County, came in with the lowest single-family bill at $660.

For more information on property taxes, visit your local assessor’s office.