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Property Taxes

Old May 29th 2014, 2:09 pm
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Default Property Taxes

We are currently in rented accommodation, searching (for 5 months now) for somewhere to buy in either Westchester NY or Fairfield county CT. We are really struggling to accept property tax levels..... anywhere between $12k to $22k on the houses we have shortlisted. Finding it hard to get the full picture from our realtors (NY and CT), but from what we can gather, any improvements we make to a house will increase the property tax.... replacing a kitchen, building a barn etc, the kind of things we would have done without a second thought in the UK. We seem to be the only people who have a problem with property taxes..... but it really does put us off buying. Just wondered what others thought? Is it just something you accept or if you're house-hunting do you set a strict limit on the property tax you are prepared to pay?? But then of course, the taxes could suddenly increase couldn't they? We are fortunate enough to be cash buyers, so would we pay property taxes as a lump sum once a year? I believe it's tax deductible (?) but in reality that doesn't really make a huge difference. Be really interested in other people's attitudes to this.
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Old May 29th 2014, 2:19 pm
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Default Re: Property Taxes

Exactly what you said. We left Westchester and New York because we couldn't find a house with a mortgage + tax cost that was attractive to us, among other reasons. Twelve years ago we were finding that taxes already ran $800-$1,000/ mth on the houses we liked and were otherwise affordable. The taxes shifted the goalposts so far we decided to throw in the towel.
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Old May 29th 2014, 2:37 pm
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Default Re: Property Taxes

That's a great question and something we play around with in a "what if" situation. We could sell our UK home and buy a lovely house here for cash, but would have property taxes of around 15-20k! We're in NJ by the way.

I didn't even realise that making improvements could increase your property taxes. Like yourself, making improvements is something that we really don't think about in the UK - we've renovated two houses so far.

When you talk about property taxes being "tax deductible", do you mean from State Taxes? The reason I ask is that we were discussing property taxes with a neighbour and he said that there's some kind of loophole in NJ and that you end up getting most of the property tax back. I haven't looked into this too deeply though as we're not planning on buying.

I was also curious how property taxes were paid in the absence of a mortgage. I just assumed you made quarterly estimated payments, or kept the money to one side to make the annual payment.

The high property taxes are off putting - especially when compared to council tax (although I do realise they are two completely different animals). I would be constantly worried about hubby being out of work and trying to pay for health insurance and property taxes (and fund university!). This is one of the reasons that we would not want to remain in the US. If I'm missing something obvious I'm someone will be along to correct me!
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Old May 29th 2014, 2:39 pm
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Default Re: Property Taxes

Property taxes are high in TX, but we have no state income tax here. I always compare it to what I would be paying in the UK. I don't have 42%-47% taken straight from the majority of my income, but they are going to get it somewhere. And yes, property taxes are deductible, and they are deductible from the highest bracket of federal tax you pay here - you can effectively save around a 1/3 of your property taxes in reduced federal tax, so it's not to be ignored. They get you one way or another I'm afraid.
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Old May 29th 2014, 3:13 pm
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Default Re: Property Taxes

Westchester property taxes are out of control, not helped by every second group of houses having their own separate village administration with their own police, fire and sanitation departments, plus town and county administrations on top, not to mention separate school districts, all with taxing powers. Our village taxes are going up by another 5% this year and everyone's pleased that the viallage "managed to avoid" imposing a > 10% hike that they first proposed. And then Cuomo touts his 2% tax cap legislation in his re-election campaign ads. Ahahaha.

You can "grieve" your taxes if you think they're too high but it's all very hit and miss. We grieved our taxes based on the fact that our house purchase price last February was 2/3 of the house's last assessed value done before the property crash. Village accepted this but the town didn't.

If you have improvements done above the (very low) de minimis for a building permit, then when the buildings department "closes" the permit after inspecting the work for code compliance they are supposed to notify the tax inspector of the amount spent. So far the renovations we had done last spring prior to moving in have had no impact on our tax assessments, but I shouldn't be surprised if that was due to the inefficiency of our village administration.

The two sweetners are STAR, which can substantially reduce the headline figure of your school district taxes, and income tax relief on property tax and mortgage interest payments: these two items can be deducted from your taxable income so you don't pay income tax on that chunk of your income, and potentially it can put you into a lower tax bracket overall if you're near a boundary anyway. I think this for federal income tax only.
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Old May 29th 2014, 4:04 pm
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Default Re: Property Taxes

Originally Posted by mrsmaccmoo
Finding it hard to get the full picture from our realtors (NY and CT), but from what we can gather, any improvements we make to a house will increase the property tax.... replacing a kitchen, building a barn etc, the kind of things we would have done without a second thought in the UK. We seem to be the only people who have a problem with property taxes..... but it really does put us off buying. Just wondered what others thought? Is it just something you accept or if you're house-hunting do you set a strict limit on the property tax you are prepared to pay?? But then of course, the taxes could suddenly increase couldn't they? We are fortunate enough to be cash buyers, so would we pay property taxes as a lump sum once a year? I believe it's tax deductible (?) but in reality that doesn't really make a huge difference. Be really interested in other people's attitudes to this.
The tax basis doesn't usually go up individually just because you did some work where I have lived -- the town has to do a full revaluation across the board for all residents/businesses. When the revaluation was last done in my town, the person didn't even come into the house, so I'm not sure that a new kitchen, for example, would have any effect; however, if you had built a barn or added a porch, that would. The taxes you actually pay are adjusted each year (usually upward, as the budgets keep growing!) according to the mill rate established by the town budget (voted on by the residents), then most towns have installment payment dates of end of July and end of January. You are sent a bill with payment stubs for the next year around the beginning of June.
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Old May 29th 2014, 4:27 pm
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Default Re: Property Taxes

Originally Posted by HartleyHare

I was also curious how property taxes were paid in the absence of a mortgage. I just assumed you made quarterly estimated payments, or kept the money to one side to make the annual payment.
I pay them at city hall and the court house, once a year, generally in February.
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Old May 29th 2014, 4:45 pm
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Default Re: Property Taxes

Originally Posted by Redwing
I pay them at city hall and the court house, once a year, generally in February.
I post a cheque off every December, they have to be paid prior to the last day of the year so I can claim them as a deduction on my taxes for that year.

In Texas you can claim 'Homestead Exemption' on your main property, this reduces the amount owed a bit, and then there is another deduction when you reach 60 or 65, not sure of the exact age.
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Old May 29th 2014, 4:47 pm
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Default Re: Property Taxes

Originally Posted by rpjs
If you have improvements done above the (very low) de minimis for a building permit, then when the buildings department "closes" the permit after inspecting the work for code compliance they are supposed to notify the tax inspector of the amount spent.
Could this be why I see houses in the $800-900k price bracket with the most hideous 1980's kitchens and bathrooms? I'm mentally adding another 40k to replace them
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Old May 29th 2014, 4:55 pm
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Default Re: Property Taxes

It varies. Around here, the tax is based on the value, usually the purchase price, and goes up 2% a year. Improvements don't affect it.

I found it annoying because neighbours in the same street who bought a long time ago pay very little due to 'Proposition 13'.

I didn't understand it when we moved and was a little shocked by the amount and the fact that it keeps rising unless your home is reassessed.

If you can buy outright though, I guess it's not too bad.
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Old May 29th 2014, 5:06 pm
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Default Re: Property Taxes

Originally Posted by Sally Redux
It varies. Around here, the tax is based on the value, usually the purchase price, and goes up 2% a year. Improvements don't affect it.
That 2% in CA is a maximum. For example, you can apply for a reduction if you have evidence your property has dropped in value. Improvements over a certain amount can increase the property's valuation and hence its taxes.

Originally Posted by Sally Redux
I found it annoying because neighbours in the same street who bought a long time ago pay very little due to 'Proposition 13'.
It's insane. There are mansions in SF that pay less tax than one bedroom apartments purchased more recently. Prop 13 is a terrible solution to a real problem of out of control increases in taxes. Any solution that doesn't tax like property the same is unacceptable imo, although a supreme court challenge to it failed.
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Old May 29th 2014, 5:12 pm
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Default Re: Property Taxes

Originally Posted by HartleyHare
I was also curious how property taxes were paid in the absence of a mortgage. I just assumed you made quarterly estimated payments, or kept the money to one side to make the annual payment.
If you just finished paying off a mortgage I'm sure the bank would be willing to keep the escrow account open, likewise if it was a cash purchase I'm sure a bank would set up an escrow account for you if you didn't trust yourself to set aside the money and send it in on time.

I sort of wish my property taxes had gone up this year. They actually went down because "the people" voted against a school bond override. Guess what now has a budget shortfall and is considering half days on Wednesdays.
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Old May 29th 2014, 5:22 pm
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Default Re: Property Taxes

Here in CA, substantial improvements (increase of square footage, or addition of a pool) DO increase the taxable base of the house, however, only by so much as the added value of the improvement. That's important as it interacts with Prop 13 in CA, where your property value takes it's starting point from your purchase price, which establishes its 'base' - that base is then increased 2% each year. If the value of your home decreases, you can apply for a temporary reduced assessment, but the State will still maintain an increase of 2% to your base annually - therefore, when house prices recover from a period of depression, you could see an increase substantially higher than 2% as your tax returns to its annually 2% increased base rate. This is likely something many CA homeowners will experience this year, as many CA homes have increased substantially in the last 18months after a number of years of falling prices.
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Old May 29th 2014, 5:25 pm
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Default Re: Property Taxes

Originally Posted by Giantaxe
Improvements over a certain amount can increase the property's valuation and hence its taxes.
I guess so - not sure how that works.
Originally Posted by Giantaxe
It's insane. There are mansions in SF that pay less tax than one bedroom apartments purchased more recently. Prop 13 is a terrible solution to a real problem of out of control increases in taxes. Any solution that doesn't tax like property the same is unacceptable imo, although a supreme court challenge to it failed.
It's nuts.
Originally Posted by sir_eccles
If you just finished paying off a mortgage I'm sure the bank would be willing to keep the escrow account open, likewise if it was a cash purchase I'm sure a bank would set up an escrow account for you if you didn't trust yourself to set aside the money and send it in on time.

I sort of wish my property taxes had gone up this year. They actually went down because "the people" voted against a school bond override. Guess what now has a budget shortfall and is considering half days on Wednesdays.
For Hartley, if you don't have a mortgage, you just pay the bill. The ones here are payable in two instalments.

Our schools are underfunded partly due to Prop 13, mentioned above. The 'solution' seems to be soirees for fundraising.
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Old May 29th 2014, 5:30 pm
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Default Re: Property Taxes

Originally Posted by ChocolateBabz
I post a cheque off every December, they have to be paid prior to the last day of the year so I can claim them as a deduction on my taxes for that year.
I don't have mine escrowed for control freakery reasons (I'd compulsively have to go into the account and check they were paid, so may as well just do it myself). They're due around Oct, either as the full amount, or half then and half in May, and you just mail a check.

Our property taxes are smaller than ones mentioned here ($4,200 last year on a $600k house) and our mortgage is smallish so I'm coming up to the edge of shall I/ shan't I itemize or take the standard deduction; apparently some people alternate paying their property taxes in full one year, and then in halves the next, so they can pay 18 months' worth in one calendar year, and then deduct that year. I'll have to run some numbers, and see whether it's worth the hassle.
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