Your Trusted Midwest Property Tax Advocate

Will your commercial property tax rise if your real estate rises?

On Behalf of | May 25, 2022 | Property taxes |

If you bought commercial real estate as an investment, you will be pleased to see prices in the area rising.

Yet, if your next tax bill is also higher, you will be less thrilled.

Are the two related?

They might be. Here is how property tax works. First, the county works out the budget it needs. Then it sets out the percentage of that total budget that it needs to garner from property taxes.

Next, it divides it between people and businesses based on the value of their properties.

So, if the county’s budget for the year is more than last year, you can expect the average property tax bill to reflect this. Yet that is not the end of it.

Real estate prices do not always rise evenly across an area. Let’s say planning permission has just been awarded for a complex of restaurants and upmarket shops in one part of town that was previously a dead zone.

Investors and business owners will see the potential to make money from real estate in that area and be willing to pay more than they would before the announcement. Property prices might spike 40% in a few streets.

If the future for your part of town remains unchanged, then prices may have risen because prices across the whole county have risen, but they will not get the extra boost the prospect of new development affords to a few select streets.

So, if your commercial property tax rose by the same amount as for those in the upcoming area of town, you would be right to question it. If you believe it is too high, you can find out more about the legal options available to challenge it.