State and Local Issues

Mansions Get Break On Property Tax Assessments

Some wealthy owners of mansions are getting breaks on their property taxes because appraisals for assessments have not kept up with swiftly increasing values. Theoretically, at least, property tax laws in most states treat all residents equally by estimating a property's market value and using a formula to calculate tax bills.

For middle-class homes, assessors often use computer models for determining a home's worth -- without having to visit the property. But if a home is unusually large or customized, the computer models don't always work.

A study commissioned by the Wall Street Journal recently analyzed property-tax records for five of America's wealthiest counties.

  • It found that in Fairfax County, Va., sales prices of homes costing $1 million or more averaged 71 percent higher than their assessed values.

  • But the sales prices of homes that sold for less than $250,000 averaged just 8 percent higher than their assessed values.

  • In Washington State's King County, sales prices of $1 million-plus homes were nearly triple their assessed values, while sales prices in the smaller-home category were just 35 percent higher than their assessed values.

  • In Palm Beach, Florida, houses in the higher-priced category sell for 116 percent of assessment, versus 11 percent higher for those under $250,000.

Officials say they lack the necessary personnel to keep up-to-date assessments. But even if they had the resources, they point out that added revenues from reassessing luxury homes isn't always worth the cost.

Source: June Fletcher, "For Mansion Owners, a Little-Noticed Tax Break," Wall Street Journal, December 5, 1997.

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