Property tax valuation notices are hitting mailboxes across Alabama and some homeowners may be shocked to learn they will owe higher taxes than previous years. While most everyone wants property values to be high, the result can be a higher tax bill. Especially in rapidly growing areas of Alabama and where demand for homes pushed prices upward, 2022 tax notices – based on 2021 values – will reflect those increased values.

According to Wallethub.com, Alabamians already enjoy the second lowest property tax rates in the nation with an effective tax rate of 0.41 percent. However, taxpayers may lower their tax bills more. Get started by first understanding the basics of property tax assessments, exemptions and calculations.

To know how your county tax assessor arrives at your tax bill, these terms will help:

Appraised Value

Appraised value is assigned to property by each county’s revenue commissioner or tax assessor. Appraisals are done one year in arrears, meaning appraisals are based on the condition of the property on October 1st of the previous year. For example, 2022 property appraisals are based on the property condition from October 1, 2020, to September 30, 2021. Counties are required to use Alabama Department of Revenue appraisal standards. Property owners begin receiving annual valuation notices beginning in late April/early May and they are published on county websites.

Assessed Valuation

A valuation placed upon property by a public authority as a basis for levying taxes on the property. The assessed valuation is based on the property’s classification. For most homeowners, that rate is 10 percent of the appraised valuation. 

Classification

Property is classified into categories set by state law. Each category assigns a percentage to a piece of property, which when multiplied by the appraised value gives a property’s assessed valuation. For example, the property classification percentage for single family, owner-occupied residential property is set at 10% of its appraised valuation. Such a home with an appraised value of $200,000 would be taxed on 10 percent of its value or $20,000. Other property in Alabama is assessed at much higher rates – usually either 20 or 30 percent. 

Mill or Millage Rate

A mill ($.001 or one-tenth of one cent) is a unit of taxation used in property taxes that equals $1 for every $1,000 of assessed valuation of the property. Essentially, one mill is  $100 for a home worth $100,000 or $200 for a home worth $200,000.

State and local governments levy taxes using mills as a factor. Alabama’s state property tax is 6.5 mills but counties and cities, with legislative and voter approval, also levy property taxes which vary across the state.  School taxes also may be levied when approved by the legislature and by voters in a referendum where the tax is collected. 

Homeowners who qualify may be able to reduce their tax bills through one or more exemptions listed here. Especially for those over age 65, disabled, or low-income, tax exemptions can significantly reduce the amount owed. Exemptions are not automatic. Homeowners must apply for them at the county tax office where the property is located. 

Most homeowners can qualify for a state homestead exemption of up to $4,000 of the assessed valuation. Homeowners over 65 years old or who are permanently and totally disabled can qualify for a total exemption from state property tax. Counties may also grant homestead exemptions of up to $2,000.

Here’s how state and county property taxes are calculated assuming the taxpayer owns and occupies a single-family home in Alabama:

Full assessed value:                                              $15,000
State homestead exemption:                              -4,000
Adjusted assessed value:                                   $11,000
State millage rate:                                                   x .0065
State property tax with exemption:               $71.50    ($97.50 without exemption)

Full assessed value:                                                $15,000
County homestead exemption:                            -2,000
Assessed value with county exemption:        $13,000
County millage rate:                                                 x .0075
County property tax with exemption:                $97.50    ($112.50 without exemption)

Disagreements over property taxes often center on the appraised value of the property. Alabama law provides a process for protesting and appealing tax appraisals. The taxpayer has 30 days following the valuation notice to initiate the process of disputing the tax. If you believe the valuation is wrong, consider whether the difference is enough to warrant a protest.  If so, here are the steps:

File a written protest with the County Board of Equalization in the county where the property is located. The protest must be filed with 30 days of the property valuation notice.

A county appraiser will review the valuation of the property and determine if any changes should be made.

If no adjustments are made, the taxpayer may request a hearing before the County Board of Equalization.  Information can be presented to support a change in valuation.

If the Board of Equalization rules against the taxpayer, an appeal may be filed with the circuit court within 30 days of the board’s ruling and, if necessary, with the Alabama Supreme Court within 42 days of the lower court’s ruling.   

If a taxpayer agrees with the property valuation and assessment, has applied for any qualified exemptions and checked the calculations, nothing else must be done except pay the taxes. Property taxes are due by October 1 each year. Often, the taxes are paid through a mortgage escrow account. If the tax bill is higher than anticipated in the escrow account, there may be a slight increase in the monthly mortgage payment to ensure the escrow account can cover the increase. Tax payments are deemed delinquent after January 1.  That’s the threshold taxpayers don’t want to cross as it sets in motion steps to collect the tax through a lien and, potentially, the sale of the property. 

For more information about Alabama property taxes, visit the property tax section at the Alabama Department of Revenue website where there are in-depth explanations and helpful links to county tax offices.