What To Do (and Not Do) If You Can’t Afford Your Property Taxes

If you’re a homeowner, the good news is that your home likely has gained a lot of equity over the past few years. However, with those rising prices typically come higher property taxes as well.

While some states, such as California, limit the amount that property taxes can rise in a given year, other states have no such restrictions. According to ATTOM Data Solutions, property taxes rose 4.4% nationwide in 2020, ahead of an expected 6.5% in 2021.

If your property taxes have risen so fast that you’re struggling with making payments, here are a few suggestions as to what you should and shouldn’t do to alleviate the problem.

There are plenty of outside sources you can turn to if you need help figuring out your property tax situation. Your first stop should be the U.S. Government’s Department of Housing and Urban Development, or HUD. The HUD Office of Housing Counseling sponsors individual counselors in every state that can offer you advice on everything from buying or renting a home to defaults, bankruptcies, foreclosures and other credit issues, including falling behind on property taxes. Many of these services are free of charge. You also can opt to hire a real estate or foreclosure lawyer.

If you’re trying to get financing to satisfy your property tax obligations, be very wary. Just as scammers or hackers may target you in your time of need, unscrupulous finance companies, such as payday lenders, are more than willing to take advantage of your predicament. Payday lenders typically charge astronomical interest rates, sometimes in the triple digits, which will only make your financial situation worse.

While you may be able to pay your property taxes in the short run, if you can’t keep up with your exorbitant interest charges, you may end up defaulting on your payday loan instead. This could lead to everything from asset seizures to bankruptcy. If taking out another loan is your only way to make your property tax payments, be sure to work with a reputable lender.

Some homebuyers look only at their mortgage payment when determining whether they can afford a home. But there are many additional costs in owning a home — property taxes, insurance, utilities, maintenance and potentially homeowners association dues. If you didn’t factor in all of these additional costs, the home that you thought you could afford may simply be too expensive for you. Moving to a lower-cost area or a smaller home may not be an appealing option, but it’s a good way to reduce both your property taxes and your overall costs.

If you find yourself in tight financial times, be on the lookout for others trying to take advantage of you. Scammers target those who are most vulnerable; and, if you find yourself behind on your property taxes, you might find yourself reaching out to anyone who seems able to help. Stick to accredited agencies or well-regarded legal experts if you are going to share personal financial details with anyone.

In times of financial crisis, it can be tempting to simply bury your head in the sand and avoid the entire issue. But simply avoiding paying your property taxes is sure to put you on the road to ruin. If you fail to pay your property taxes, your tax authority will place a lien against your property, and you’ll be assessed late payment fees and penalties. If you persist in avoiding your property taxes, your home may ultimately go to auction. If you don’t want to rack up additional costs or even lose your home, you’ll have to face your property tax delinquency head-on.

Before you seek outside options, it’s usually a good idea to speak with your taxing authority directly about possible payment options. Especially during times of national economic crisis, such as during the peak of the coronavirus pandemic, agencies are generally willing to work out payment plans for delinquent accounts.

Since the forced sale of a home due to a tax delinquency doesn’t benefit anyone, you may be able to set up an installment plan or deferred payment plan until you can get back on your feet and make payments on your own. If nothing else, you may be able to at least skip a payment or two before penalties are assessed on your account.

The sure way to make a tough financial situation harder is to panic. While there might not be an easy solution to your predicament, letting emotions take over is a surefire way to make things worse. Take a breath and realize that you have a number of options to deal with your inability to pay your property taxes. Being proactive with your finances, in both good times and bad, is the best way to stick to your long-term financial plan and reach your goals.

If you can’t quite keep up with your property tax payments, a small boost to your income might be all you need. Picking up a part-time or side gig could add hundreds or even thousands of dollars to your monthly cash flow. For the average-priced American home, that should be more than enough to satisfy your property tax obligations. You also could consider asking for a raise at your current job, perhaps suggesting that you need a wage increase to keep pace with the skyrocketing rate of inflation.

Although you shouldn’t panic if you find yourself in this situation, failure to meet your property tax obligations is a serious issue. If you want to protect your home, you’ll have to straighten out your financial situation. In other words, this is not the time to be incurring additional debt. Focus your cash flow and financial resources on making your property tax payments first. Only after you stabilize your finances should you even consider other debts or payment obligations.