Are Savings Possible Combining Adjoining Tax Parcels

Reader Question: Dear Monty, My wife and I recently purchased some lakefront property. The property contains two small, similar lots. We plan to keep both of them. One lot has a cabin, and the other is vacant. We currently pay property taxes of $800 (cabin parcel) and $550 (vacant parcel). At the time of purchase, I asked the selling agent about the possibility of joining the two parcels as a possible tax-reducing move. She seemed to think that the fees involved, and the inconvenience factor would make this a bad idea. The building on the cabin parcel is extremely close to the property line. The well and the driveway are on the vacant property. I cannot imagine that anyone would ever want to separate the two parcels. Would a single, combined parcel reduce taxes? Thanks! Gene V – Little Suamico, WI.

Monty’s Answer: Gene, the real estate agent’s premise may be true. The fees she alluded to are for a new survey, drafting a new legal description and recording those documents with the county’s register of deeds. The unknown here is assuming the assessor would reduce the assessment. It is possible they may see a change like this as an opportunity to raise the assessment.

On the other hand, if you plan on owning the property for some time, determining the outcome of consolidation in advance is possible with some effort. Then, an intelligent decision could be made. If you have (or can locate) a properly staked boundary survey, the actual cost may be minor.

Some people considering this situation would weigh the time expended to recover the investment. It is strictly a judgment, but a five-year payback is common. As an example, if the cost was $500 and the tax savings were $100 annually, the five-year payback test is valid.

Here, are the steps to take:

  1. If you have the plat of survey, great! If not, start with the real estate agent asking the former owner. If the owner does not have it, then, with the tax bill that contains the parcel number in hand, call the county land records office. They can determine if the survey is on file using the tax parcel number or the legal description.
  2. The land records office will be able to name several surveyors that work in the area. Call at least three of them to get a quote. The main question to ask is: What will it cost to do all the work required to consolidate the two lots into one, including the new description and the recording fees?
  3. If the survey cost estimate seems within reach, then the next step is to perform some research. Ask the land records office or the surveyor how to obtain a map of the lake showing all of the lots and the subdivision plats. There may be a cost to obtain a copy. Then, identify a number of lots that are similar in size and amenities to your proposed consolidated lot. Review their assessments to determine if they are less than the total assessment of your two lots. While this exercise may involve a trip to the county treasurers office, it will provide a clue or clues as to the strength of the argument I propose you use to negotiate in the next paragraph. It will be helpful if the county has their records on a geographic information system (GIS) on their website.
  4. Now contact the assessor. You want to learn how they would proceed knowing the two parcels are combined. Be clear with them that your goal is to reduce the assessment. Share your logic with the assessor. The logic is, in reality there is only one “home site”. While there are two lots on record, they are so small, the well and the driveway to the cabin are located on the other parcel. To combine them would simplify the tax department’s work and your record keeping. Ask specifically, if this were to be done, could the assessment be reduced by the amount of the assessment on the vacant lot? This is where your homework could come in handy.
  5.  If they confirm this can be done, the assessor has accepted your logic. I would gather their email address and memorialize the conversation in writing with the assessor. They may withhold judgment until they can see the property. Most everything in life is a negotiation, and this is no exception. Your request to extinguish the entire assessment on the second lot may be overreaching, but you have to start somewhere. It may not go this well in reality, and the assessor may provide a counter proposal or just refuse your suggestion. Either way, you will know if you want to move forward. As a caveat, most units of government are searching for more revenue, not less.

Gene, thanks for asking. I hope this information is useful. I will be curious as to the outcome so let me know. Ask me if you have other questions.







2 responses to “Are Savings Possible Combining Adjoining Tax Parcels”

  1. Steve

    If this could be done, how might it affect any federal tax if property sold? In other words, capital gains might not apply to the vacant lot anymore because it is now part of the primary residence lot??

    1. Monty

      Hi Steve. My understanding is both primary residences and vacation homes held for more than a year qualify for capital gain treatment as does vacant land. I see no effect but if you are contemplating acting on this be sure to verify with your own accountant.

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