If you opened your latest property tax assessment with a wince, you are far from alone. Recent industry data suggests that nearly two-thirds of U.S. property owners were caught off guard by their most recent bills, and the increases are running well ahead of broader inflation. The good news is that property taxes, unlike many fixed costs, are not entirely outside your control. There are concrete strategies worth considering before you simply write the check.
What’s Behind the Increases
The rising tax bills are not just a reflection of higher property values. Three forces are converging to push assessments (and the cash you owe) meaningfully higher. The first is straightforward municipal revenue pressure. Local governments facing budget gaps are raising rates regardless of where home values sit, and in some high demand markets they are explicitly targeting wealthy owners. New York City’s proposed “pied-à-terre” tax on properties valued above $5 million is a clear example of where this is heading. The second driver is a quiet but consequential burden shift from commercial to residential property. With office vacancies still elevated, commercial owners are aggressively appealing their assessments downward, and municipalities are recouping the lost revenue from homeowners. The third is federal: the One Big Beautiful Bill Act of 2025 raised the SALT deduction cap to $40,400 for 2026, but it introduced a steep 30 percent phase-out for taxpayers with Modified Adjusted Gross Income above $505,000. For high earners, that phase-out rapidly reduces the deduction back to a $10,000 floor, effectively neutralizing the relief on the federal side just as state and local bills climb.
Where the Leverage Lies
Property tax is too often treated as a static carrying cost. It does not have to be. The most direct opportunity to reduce it is an appeal of the assessment itself. Success rates in high-tax jurisdictions often run between 10 and 20 percent, which is meaningfully higher than most owners assume. The case turns on equity and market comparability — specifically, whether your assessed value is in line with recent sales of comparable homes in your neighborhood. If it is not, you have grounds for a reduction. Engaging a property tax attorney or a specialized appraiser to build the comp analysis and present it to the municipal board materially improves the odds.
Another strategy to reduce the impact of your property tax bill is managing your income around the SALT phase-out threshold. Because every dollar of MAGI above $505,000 effectively costs 30 cents of your property tax deduction until you hit the $10,000 floor, year-end tax planning becomes a year-round exercise in income leveling. Quarterly check-ins with your accountant to identify pressure-relief valves – maximizing 401(k) and HSA contributions, deferring year-end bonuses, harvesting capital losses, or accelerating charitable giving through a donor-advised fund – could preserve thousands of dollars of deduction that would otherwise evaporate.
For business owners well above the phase-out, more advanced structures come into play. State-level Pass-Through Entity Tax (PTET) regimes allow taxes to be paid at the entity level and deducted as a business or investment expense before income flows to the individual, preserving a federal deduction that would otherwise be capped. Holding residential or investment real estate inside a multi-member LLC or S-Corp can open the door to this treatment, though it requires careful coordination between a tax attorney and an accountant. Investment property owners should also revisit cost segregation studies in light of the OBBBA’s permanent reinstatement of 100 percent bonus depreciation, which can generate accelerated deductions to offset active income and free up liquidity for unavoidable tax outlays. And when the carrying cost of a specific investment property simply no longer makes sense, Section 1031 exchanges may be a helpful tool for deferring capital gains while rolling equity into a more tax-efficient asset – including, for those ready to step away from active management, into a Delaware Statutory Trust or a Section 721 UPREIT structure that exchanges physical real estate for diversified REIT shares.
A combination of the above strategies could help reduce your property tax bill this year. Please reach out to your Wealth Manager to discuss.
