Property taxes are an unavoidable expense when you own a home, and many people struggle to pay theirs even when there's not a major health and economic crisis at play. But since COVID-19 has been ravaging the economy since it first took hold in the U.S., many homeowners are wondering how it might eventually impact their property taxes -- for better or worse.
Will COVID-19 drive property taxes down?
There's already talk that COVID-19 will spur a full-fledged economic recession, especially if it drags on for a year or longer. And since health experts have made it clear that a vaccine is at least a year out, that's a distinct possibility.
So what happens during a recession? A lot, actually. Jobs tend to get lost, stock portfolios can drop, and home values can decline when there's more supply and less demand. But while the latter isn't good news for homeowners who may be looking to sell, it could actually result in a degree of relief on the property tax front.
Your property taxes are a function of your home's assessed value multiplied by the tax rate your town or municipality imposes. That assessed value is effectively what your home would sell for if you were to list it on the market. If your home's assessed value is $300,000 and your local tax rate is 2%, you're looking at an annual $6,000 property tax bill.
But what happens if home values decline as a result of COVID-19 so that your home is only worth $275,000 a year from now? Suddenly, you're looking at a tax bill of $5,500, provided your home is reassessed. And if your home is not reassessed automatically by your town but home prices in your area clearly decline, you can appeal your property tax bill and potentially lower that burden yourself.
Of course, all of this assumes that the COVID-19 crisis will drag on and severely batter the economy for months on end. There's still hope that may not happen, especially as scientists work tirelessly to develop effective treatment for the virus. Though health experts have made it clear that a vaccine is out of the question in 2020, the right treatment protocol could result in a relaxing of social distancing measures -- and a reopening of the economy that helps ward off a recession. If all of that happens, home values may not fall, and property taxes may therefore stay right where they are.
So which scenario should you wish for? For the most part, it's safe to say that most people would rather see this crisis wrap up than have it drag on for the sake of lowering their property taxes. But if that doesn't end up being the case, and things get worse economically, the one silver lining is that your property taxes may be lowered in the process.
What if you're struggling now?
Of course, a lower property tax bill in the future doesn't help you if your income has been cut by COVID-19 and you can't swing your taxes right now. If that's the case, talk to your tax collector about your options. You may be allowed to defer your payments temporarily without penalty, though that'll depend on how flexible your town is able or willing to be. While there's plenty of relief to be had right now on the mortgage front -- think deferment or forbearance -- unfortunately, that doesn't necessarily extend to property taxes, leaving some homeowners in an extremely tough financial spot.
Falling behind on your property taxes could, under normal circumstances, land you in foreclosure, but because of the COVID-19 crisis, you may have some protection in that regard. Still, reach out and see what options are available if you don't think you'll be able to make your next payment to avoid any catastrophic surprises.