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Mellody Hobson talks property taxes in today’s “Money Mondays” segment.

It’s great that the housing market has enjoyed a slow and steady recovery from the mortgage crisis of ’08. It’s been a seller’s market the past couple of years because there was a shortage of homes for sale, driving up prices. In fact, home values were rose over 12% July 2012 to July 2013, according to the Standard & Poor’s Case/Shiller home price index, which tracks sales in 20 cities. But higher prices for homes means higher property taxes, so I wanted to go over a few of the basics for everyone to ensure they’re not paying more than they need to.

What do we need to know?
Let’s start with a quick recap of the lingo.

Property taxes are usually calculated by taking the assessed value of your home and multiplying it by the tax rate that has been determined by your local government. Exemptions provide tax relief by reducing a property’s taxable assessed value, that is, the portion of the assessed value to which the tax rate is applied. Abatements also reduce the amount of tax that is due, by giving a dollar credit against the actual tax liability. And rebates provide a refund to offset a portion of the tax already paid. All three of these things work to reduce your property tax bill.

What are the top reasons you might be overpaying on your property tax?
The first and most obvious reason is that your home’s assessed value is too high. This is a matter of comparing. Does your property value “fit” with the neighborhood?  Look at homes in your area that are comparable to your property in size and the year they were built, and find out how much they’re paying for property taxes. You may find comparable properties are charged substantially less than you are, and this is a good argument to lower your home’s assessed value.

Another common mistake is that you actually have an illegal assessment. Check to see if your home is assessed at a higher percentage of its market value than the law allows.

Finally, there could be an error in your tax assessment.  You should closely examine your tax records and check for mathematical errors in recording the details of your house or lot. The most common errors are found in the building’s age or the building’s size.

You typically have 60 days to file an appeal after receiving your assessment, so don’t dally.

Can you walk us through how to contest your property tax?
Protest strategies vary in different locations, but the first step is the same everywhere: call at the tax assessor’s office in your city and ask to see the figures on your home. Ensure there are no errors in the report.

The next step in some states is to research tax records in your area to see how your taxes measure up to your neighbors. Tax records are open to the public, and you should look specifically at the taxes of properties similar to your own.  Hard figures will greatly increase your odds of winning a concession if you believe your home is overvalued.

Check the recent selling prices of nearby properties similar to yours. You may want to consult a real estate broker or appraiser for these figures, but there are plenty of great, free online resources like realestate.com and zillow.com.

When it comes to filing, your tax assessor’s office can give your guidance about how to protest. The first step can be logging an informal complaint with the assessor, then to a local board, either at a regular meeting or on a specific yearly date.  If your taxes are not lowered and you are still convinced you are overpaying, you can appeal if you have the wherewithal to keep going.

In most areas, you can enlist a professional to help you, but they will likely charge a percentage of the first few years’ saving if they can secure lower taxes for you.

So overpaying is more common than you might think?
Yes! Statistics vary by area, but According to the National Taxpayers Union, between 30 and 60% of taxable property in the United States is over-assessed, and this leads to higher property tax bills.  Middle- and lower-income taxpayers are among the most often over-assessed. But here is the interesting part: Typically, fewer than 5 % of taxpayers challenge their assessments, even though the majority who do so win at least a partial victory when properly prepared. The lesson is that if you think you’re overpaying on property taxes, you probably are.  You have the right to contest your home’s tax assessment, and it isn’t as much trouble and red tape as you might think.

Are there other property tax breaks out there that people aren’t taking advantage of?
Absolutely.  Each state has different property tax rules.  Some states, like New York and Idaho, have property tax reduction programs.  Many homeowners are entitled to reductions in their property taxes, but do not receive them simply because they have never applied.  Research eligibility in your own state, as there are often abatements for senior citizens, veterans, and those with disabilities.

Mellody is President of Ariel Investments, a Chicago-based money management firm that serves individual investors and retirement plans through its no-load mutual funds and separate accounts.  Additionally, she is a regular financial contributor and analyst for CBS News.

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