Property tax is paid by the property owner and is directly related to the value of the property. The government body that collects these taxes uses them for a variety of reasons, but there are ways around paying exceedingly high taxes. As a business owner or investor, making the most of property tax is essential to maintaining a profit.

Taxes on property vary widely. The first step is to find out what the costs are and what the local laws are regarding them. Consider local taxation from county officials and any state taxes also needing to be paid. Here are a few more items to keep in mind:

1. Know that property taxes are different from one state and region to the next.

2. Realize that real estate property tax helps the business by providing for road maintenance and other municipal services.

3. Learn the property tax laws through professional services that are experts locally.

Action Steps
The best contacts and resources to help you get it done

Save money using property tax software

Property taxation can be difficult to maintain. Corporate offices and large-scale companies may wish to invest in quality software to help them maintain taxes. Choose software that can help spot ways to cut tax costs and to maintain quality tax compliance.

I recommend: Compare options in property tax software to locate the best product available. Find individual companies providing a wide range of tax software products to choose from. Tax Compliance educates property owners on taxation of property for investors and business owners. It offers a line of educational products to assist in maintaining software and taxes. BestOnlineTaxPreparation provides a thorough look at tax products and gives details of what they can do for a business.

Seek out property tax law and tax breaks

To lower property tax costs, find tax breaks available locally. Most areas offer a variety of tax breaks to investors, business owners and industrial facilities for coming into the community and providing jobs. Other tax breaks are available through states.

I recommend: Know how to lower property tax rates. The Los Angeles Times features information and news on real estate property taxes, including information on deductions and tax breaks for real estate investors. AllBusiness provides information on tax breaks, discounts, abatements and other tax information for use by investors.

Hire professionals to manage property tax rate and payments

Property tax information can be gathered by a third-party organization and managed through its services. While this may be an additional cost, it is also a way to get expert advice. They may be able to help a business owner or investor save substantially by finding tax breaks or lobbying courts for lower costs on behalf of the business owner.

I recommend: Gather information about taxes from professionals and use their services to learn more about ways to pay less. Attorneys are among standard service professionals that can aid in property tax disputes. Lawyers helps locate attorneys within local regions for tax purposes. CPA Finder can help find trained, professional accountants to help maintain property tax requirements and help find potential tax breaks for businesses.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Talk to local assessors to determine if the personal property tax currently being charged is accurate. Find assessors through the county or state treasury board or municipality websites.

Many complex issues can affect your business property taxes. If you're like most small business owners, you probably don't have the manpower or the expertise to keep track of all those issues. As a result, you could be overpaying on your business property taxes — to the tune of thousands of dollars per year. However, there are several simple steps you can take to reduce your property tax payments. One of the first steps in minimizing your tax obligation is scheduling an assessment of your property. When you do, keep the following in mind:

1. Even if commercial property values in the local market are rising, taxes at every business property are based on an individual assessment and history and may not increase as much as other adjacent businesses.
2. After you receive the new property assessment, check with an assessor to determine if the market value compares accurately with the assessment.
3. Another option is to ask your personal banker to see if he or she can appraise your property and compare that to the local tax collector's assessment.
4. Local tax collectors have been known to hike commercial property taxes beyond what the market dictates, so there is precedent for challenging assessments.

Action Steps
The best contacts and resources to help you get it done

Assess your assessment

Determine whether the assessed value of your business property fits the current market conditions.

I recommend: AVTI, a nationwide property tax consulting firm, offers valuation analysis and assessment tracking among its many services. The American Society ofAppraisers has a searchable database that will allow you to locate an appraiser in your area.

Compare your assessment to neighbors

Find out what other businesses in your area are paying to see if your taxes are in line with theirs. You may have grounds for an appeal if you're paying more than your business neighbors.

I recommend: For a small fee, Intelius gives you the ability to look up the property tax information for any address in the U.S.

File appeals

Call your local tax office to ascertain exactly how to file an appeal. Some cities have 311 numbers that can direct you to the right office.

I recommend: The National Tax Resource Group offers professional appeal services for all types of commercial real estate nationwide. These services are handled through qualified consultants in your local area.

File appeals for business personal property

Sometimes, you can reduce business property taxes through a business personal property tax appeal. This involves the valuation of equipment, furniture, computers and inventory.

I recommend: BurrWolf.com offers a number of property tax reduction services, including business personal property appeals.

Analyze additional factors

Several things can affect your property taxes, such as income and expense statements, market capitalization rates, replacement costs, costs of environmental cleanup and more.

I recommend: CBiz.com, a national property tax solutions firm, analyzes a wide variety of elements that may result in a reduction in taxes.

Consider a cost-segregation analysis

Cost segregation studies identify various components of your building that may be eligible for accelerated tax depreciation. By reclassifying certain assets in this way, you may see significant savings in your property tax obligations.

I recommend: The Griffin Valuation Group are experts in cost-segregation analysis and property tax consulting and aim to lower business property tax burdens.

Use software

Using a property tax software program can help you root out possible reductions and facilitate the appeal process.

I recommend: With ePropertyTax Office, you can track appeals, process assessments and analyze valuations.

Ensure proper zoning

Tax rates are linked to the various zoning classifications so it's a good idea to contact your local state tax office to ascertain if your zoning classification is accurate.

I recommend: Click on your state at TaxSites.com to make sure your business is classified correctly.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  When you receive your annual commercial tax assessment, if you question it or are going to file an appeal, don't delay. In some states, you have only 60 to 90 days to file or lose the right to appeal.
• •  Remember that several factors can influence a change in commercial property taxes including a change of ownership or new construction.
• •  Ascertain whether your business is located in a designated empowerment or technology zone, which can reduce commercial taxes.

Property tax is a necessary part of owning any type of real estate in a jurisdiction with such laws. The amount of tax paid is often based on the value of the property. For investors, managing taxes is just as important as managing the property's value. Prior to investing, an investor should have a good idea what to expect come tax time.

Taxes on property may be something that must be paid, but the process and the cost does not have to be high. In many areas, there are tax professionals available to minimize the struggle of paying taxes or managing them. Keep these things in mind prior to using any service or product in regard to taxes:

1. Take the time to question real estate agents about property taxes prior to making a real estate purchase at least about property tax basics.

2. Investigate real estate property tax of other buildings and property similar in size and type to your own in the local area through public records.

3. Gather information about property taxes through trusted, local sources whenever possible.

Action Steps
The best contacts and resources to help you get it done

Learn the local property tax rate

Finding the property tax rates may require a bit of research. Those purchasing real estate can gather basic information from their real estate agent. Public record searches at county and municipal offices can yield additional information regarding the current tax rate. Learn local taxation methods since these vary by state, county or municipality.

I recommend: Estimate property tax costs from available reports. The Offices of Real Property Services for the State of New York provides a specific methodology on calculating taxes. Most states have similar setups to help property owners understand the process. Contact a local tax estimator for the county or state to determine what the actual property value is and what the tax cost for it will be. The State of Michigan, Department of Treasury provides an online guide to calculating taxes.

Negotiate to change property tax law

Property tax laws for each region are dependent on a variety of factors including the current goals of municipal councils, the laws passed by county offices and by the ability of a company to show what they should pay. For example, government officials can help to modify laws if the company has a reason for it. Negotiating abatements and adjustments is possible in most areas.

I recommend: Change property taxation by being informed. Strafford Publications offers an in-depth, step-by-step plan for accomplishing changes in the way that taxes are paid by a business or investor. Commercial Property Services provides a look at what it takes to change property laws and provides professional assistance in making this happen for commercial organizations.

Manage taxes through property tax software

A variety of types of property tax software can be used to manage taxation. Corporate tax departments will need a quality product specific to the region to help minimize the cost of taxes and to ensure tax compliance costs are low.

I recommend: Take time to gather all necessary property tax information prior to investing in software to be sure the best investment can be made. Tax Compliance offers a range of information tools and resources, including taxation software and training for commercial businesses. The Tax and Account Sites Directory from AccountantsWorld is a complete listing of tax service professionals and what they offer. Business owners can utilize this tool to learn what options they have in taxation software for the business.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Personal property tax and commercial property tax are very different. Investors owning a commercial business will need to hire a professional tax accountant to manage taxation. Investors owning rental property or other investment real estate may follow personal property tax guidelines. A tax professional is still wise to have.

Property tax is administered through local governments and imposed on individuals and businesses who own real estate. Property taxes are based on the location and the market value of the property. County assessors re-evaluate property tax amounts periodically to ensure that the tax amount accurately reflects market conditions. Property owners can also request off-cycle county re-assessments if they have reason to believe that their tax rate is set too high or low.

To gain a better understanding of property taxes, it’s important that you obtain knowledge about several property tax key terms such as county assessors, fair market value, ad valorem tax, comparables, real property and tangible property.

Action Steps
The best contacts and resources to help you get it done

County assessors

County assessors are government officials responsible for identifying, listing and calculating the assessed value of property for tax purposes. Assessors appraise real estate at 100 percent of its fair market value.

I recommend: Find out more about the responsibilities of county property assessors by visiting Assessor.com.

Fair market value

Fair market value is defined as the amount of money that an unobligated property buyer is willing to pay the seller. The fair market value of a property is determined by recent sales of comparable properties and other available comparable information.

I recommend: Read more about market value at USLegal.

Ad valorem tax

Ad valorem tax is another commonly used term for property tax. Ad valorem tax is based on property ownership and is determined by the assessed value of real estate or personal property. Property tax generates a great deal of revenue for states and municipalities.

I recommend: Learn more about ad valorem tax at FindLaw.

Comparables

Comparables, also referred to as comps, is property information used as the basis for determining accurate property values. Assessors compare property type, size, location, condition and age.

I recommend: Read more about comparables at O’Connor & Associates.

Real property

Real property is all physical real estate. Real property includes all land and structures situated on the land used for business or residential purposes.

I recommend: Find out more about real property at Cornell University Law School.

Tangible property

Tangible property is property that is movable and not permanently attached to real estate. Methods used to assess the value of tangible property can vary among taxing districts. The definition of real property and tangible property also varies among tax jurisdictions.

I recommend: Learn more about tangible property at Caruthers & Associates.