Whether you are a property owner or tenant, every businessperson should annually review his or her property tax assessment to determine whether property tax payments are fair. This is especially true in times of economic downturn, when declining real estate markets often translate to declining property values, providing an opportunity for commercial and industrial taxpayers to reduce their property taxes by lowering their assessments. Often the tax burden on a property is unfairly high.
The New Jersey property tax appeal process is straightforward with evaluative information easily acquired. In New Jersey, businesspersons (other than sole proprietors) must be represented by an attorney at tax appeal hearings.
—What Is the Basis of a Property Tax Appeal? —
All taxable real property in New Jersey has an assessed value. This value is determined at the time of original construction and then adjusted infrequently through municipal revaluation or reassessment. To approximate these static assessments to current market value, a single “average assessment ratio” for each municipality is determined annually. Actual sales surveys are used to determine the percentage of assessed value to market value on average in the community, which is called a “director’s ratio.” This “director’s ratio,” when applied by a taxpayer to adjust an individual assessment, provides an “assumed,” or fair market value. When this assumed fair market value exceeds the true fair market value of the property by more than 15 percent, the assessment must be reduced.
—How Is an Actual Property Tax Appeal Amount Determined?—
Let’s assume the worst case scenario for a property owner – an example where the property’s assessed and market value are nearly equal. Is tax savings possible? Absolutely.
Assume a piece of property has a tax assessment of $470,000 but has a market value of $475,000. The director’s ratio for this particular town equals 85 percent. Thus, the imputed fair market value of the property is $553,000 (assessed value divided by the director’s ratio). Since the property’s imputed value ($553,000) is more than 115 percent of its true value ($475,000), the taxpayer has proven tax discrimination and is thus entitled to a reduction. Therefore, the property’s assessment will be reduced to
$403,750 (the market value of $475,000 multiplied by the director’s ratio of 85 percent equals the new assessment).
In this example, a mere $5,000 difference in assessed and market value generates a 15 percent tax savings.
Note: In a revaluation or reassessment year, or when the ratio is 100 percent or higher, the 115 percent discrimination rule does not apply.
—Where and When Can I Find Out My Town’s Director’s Ratio and Assessment Information? —
Director’s ratios are typically available on October 1 of the pre-tax year. This information can be obtained from your local tax assessor. The assessment information is on the tax bill.
—How Do I Determine My Property’s True Market Value? —
There are three ways to determine value: comparable sales, cost of improvements adjusted for depreciation and land sales, and income from leases. The most credible evidence in determining your property’s true value is recent comparable property sales in your community or area. Of course, for many businesses there are no recent comparable sales. In such cases, an analysis of cost-to-construct and/or income produced by the property can indicate true market value, calculations which a property appraiser is best qualified to perform. True value is always that value as of October 1 of the pre-tax year.
—As a Tenant, How Can I Participate in the Tax Appeal Process? —
Tenants can directly appeal property taxes in cases where the owner provides written permission or the lease allows for tenant appeal. Because lowered tax assessments usually work to increase property value – and reduce tenants’ costs – responsible owners will cooperate on tax appeal opportunities.
—Where and When Can a Property Tax Appeal Be Filed? —
Appeals of property assessed at less than $750,000 must be filed directly with a County Board of Taxation. Appeals of property assessed at higher amounts can be filed at the County Board of Taxation or directly with the State Tax Court. April 1 of the tax year is the filing deadline for property tax appeals.
—Is There a Property Tax Appeal Filing Fee? —
Yes, the filing fee ranges up to $200, depending on assessed valuation and choice of forum.
—What Is the Actual Tax Appeal Process and Timing? —
Typically, County Boards must hear and determine tax appeals by September 30. Tax Court appeals take longer and have no set limit. The process always involves a public hearing where the merits of the appeal are debated.
—Are There Other Important Considerations? —
It is important to consult an attorney or other tax professional for advice regarding your tax assessment, or risk loss of the right to maintain an appeal. Owners of income-producing properties are required to file income and expense statements upon request of the assessor.
Failure to do so will result in a dismissal of an appeal. Appeals of added or omitted assessments or farmland rollback taxes have different deadline dates. A late filing of any appeal is fatal.
—For More Information—
If you need additional information, please contact Andrew Musick at 609-393-7707, ext. 9512, or via e-mail at
Updated: June 16, 2016
This information should not be construed as constituting specific legal advice. It is intended to provide general information about this subject and general compliance strategies. For specific legal advice, NJBIA strongly recommends members consult with their attorney.