mmhendrie

it is worth remembering also that property taxes are tax deductible - so you essentially get 25-33% back of what you're paying (depending which tax bracket you're in).

Giantaxe

I don't think a lot of folks here understand that and I bet there's going to be a lot of squealing come fall when assessments/bills are sent out.

Giantaxe

If you (i) itemize deductions and (ii) don't run into AMT issues because of the tax deductions that are disallowed for AMT purposes...

mmhendrie

yes. They've already started sending out reassessment notices - basically 'heads-up' notices, the bills don't come until later.

I bought a property in 2003, which has seen its base increase by the 2% each year, but for the last 3yrs it was given a fairly substantial temporary reduction. While I got the temporary reduction, the county did send me letters each year indicating the value I was being assessed at was temporary, but also indicating a 2nd value - the Prop 13 2% adjusted base value - which continued to increase.

Two days ago I got another letter from the county, stating that as property values had now increased, the temporary reassessment had been removed from my property, and my property is now being valued at its Prop 13 base level. That will actually mean a whopping 19% increase between last years assessment and this years assessment. As you said, I think we'll hear 'a lot of squealing come fall when assessments/bills are sent out'

What's interesting is the 19% increase, which gets me back to my Prop 13 level, is still substantially lower then the actual current value of my property. Were my taxes to rise to the level of my properties actual worth, it'd increase 37% - then there'd be REAL squealing!

mmhendrie

Yes good points - although owning a house is often justification in itself for itemizing your deductions, certainly one with property taxes in the $12k-$20k range would be! The Tax Relief Act in 2012 substantially reduced the number of people who have to pay AMT (I think it's under 4million people now), but ultimately it might still be a factor and should be explored before you pin any reliance to an otherwise sizable tax deduction.

Giantaxe

I saw some figures a while back that suggested that (particularly married) owners often don't have enough deductions to itemize. But that certainly wouldn't apply to the OP!

AMT woes still tend to affect people in areas with high state taxes, high prices (with consequently higher mortgages) and/or high property taxes... such as SF. But you're right that the changes in 2012 significantly reduced the number, with the indexing of AMT exemptions helping each year as well.

Uncle_Bob

And the home owners insurance. If you are going to sink $50-60k into kitchens and bathrooms etc you are going to want to get you home rebuild costs adjusted accordingly.

MsElui

they assess the property each year and give you the latest 'value'. it can go up as well as down. It did go down on this house a few years ago but is raising again now.

The dont come into the house (maybe they have the right??) but ive never heard of this - so if you put a new kitchen in - they wouldnt know. THAT might factor into the tax the next time the property was sold as they may take the 'last sales price' into the following years increase/calculation?

i dont think to much about it to be honest. Its there, we knew about it when we arrived, we want good schools so we chose to live in this area. Its done monthly with the escrow so its not a huge hit for us in one go.

MsElui

and if your worried about it so much- buy a condo!

WEBlue

While house hunting we were VERY aware of property taxes. I think you'll find people are more conscious of them than they may admit. We absolutely figured it into the cost of any house we'd buy.

We focused our search on towns that had low taxes, but what was interesting (this seemed true in much of western CT) was that the low-tax towns would have houses that were higher-priced (for a comparable house) and vice versa. So whoever said they'll get their money one way or the other was right....

The town with the lowest taxes we looked at was Westport, CT--with out-of-reach house prices (for us). Much of Fairfield County was like that, especially if the town was on the main train line to NYC.

For information on taxes, try the city-data.com forum. I think that's where we found our property tax information for the towns we were most interested in. They do discuss & compare property taxes on that forum quite a bit, so if you do a search on 'taxes in X town' you may come up with recent figures.

Also, the real estate website Zillow will list property taxes (last year's usually) on each property. You can look up any house by address, and if the house is on the market, Zillow should show the tax.

Good luck!

ChocolateBabz

Same here, no interest free loan to the bank from us, I am perfectly capable of putting the money aside and writing a cheque all by myself. Plus at closing they wanted a huge amount 'up front' to cover any future shortfall, erm no I don't think so matey!

S Folinsky

It is not uncommon for the bank holding the security interest to require an "impound account" for payment of property taxes. However, many, if not most, states disallow imposition of the impound account if the owner's equitable interest is above a set percentage of of the value of the property. A friend in Texas just had a reassessment which increased her property taxes but also allowed her to get out from under the impound account.

As for my house, ever summer we receive a bill for the next year's taxes payable in two installments in December and April. Residential property taxes are a deduction on the Federal and California income tax returns.

A few years back I was ready to battle on a reassessment for improvements when I received the call from the assessors office. They noted a problem, my plans showed that my end result was what they already showed me having and they wondered what I had demolished. It turns out that we had demolished a non-permitted "improvement" -- "Oh, you removed a non-conforming use. That is tax neutral." Nice.

California has "Proposition 13" which sets property taxes at 1% of purchase value [plus bonded indebtedness] with a cap on annual reassessments at 2%. We've been in our house for a long time so our taxes are about 25% of what a new owner would have to pay. This had been challenged in court some years back and the challenge failed. Is it "fair?" -- the new purchaser knows what they are getting into and all owners have a degree of predictability.

goatherder

Hi - here is my take on all of this...

I live in NJ - so the taxes are not as bad as some of the areas you are looking into but still in the 15K region a year.

First they are tax deductible on both state and federal. The AMT does not allow them so if you are on the edge of the AMT thresholds it may make more sense not the prepay the taxes that year and wait to the next if your tax matters are simple enough to work it all out. AMT also seems to be phased in - so the AMT I pay is not enough to completely wipe out the deduction from property tax and mortgage interest. You have to do the calculations. And yes I dislike AMT very much - its not particularly transparent in my view. I dont mind paying the tax - just make it clear rather this AMT thing.

My town allows a discount if you pay up front. I've never found it to be a compelling offer so I just pay quarterly.

Improvements generally will result in an increase in improved value and therefore the property tax may go up. It really depends on what you are doing improvement wise and whether permits are required or not. I find the entire permit requirement to really just be a money grab by the towns. But then I sort of like the fact that the entire permit thing is really just about charging the folks doing improvements for the inspection costs rather than just charging everyone via a flat rate loaded onto the taxes.

Don't forget that by renting you are still paying property taxes - its just in your rent and not directly billed.

Initially I found it to be a bit irritating that there is this "hidden cost" but over time I've come to accept it and actually I'm starting to seeing the merit in it. The school budget makes up around 63% of my taxes. I equate that to paying for private school - ie I could live in a town with much lower taxes but I probably wouldn't be happy with the schools and therefore would pay for private school (which wouldn't be tax deductible). Plus its not based on the number of children you send - just the value of your house. There are some communities in NJ which do not have high schools and just farm out the kids to other towns on a one by one basis. The taxes in these towns are significantly lower as most kids go to private schools.

You also need to check what the taxes cover - for instance in my town water is separate, sewer is separate (as some houses have it some don't), rubbish is included.

It does irritate me how small some of these towns are and that in most cases I don't see alot of shared services occurring between towns but it is starting to happen around my area more and I'm happy about that (ie sharing of emergency 911 centers etc...).

Overall I think the tax burden in the US is less than I had in England (particularly because my other half doesn't work) when I include all of the taxes (Federal, State and Local) so I don't really mind how they decide to collect it - with the local taxes at least I have a small influence on how its spent.

What I really don't get is what the county does - a few parks and a few random roads plus a prison is what I can work out. It makes up 10% of my property tax. I do wonder why each town needs its own police force as well. The Fire and Ambos in my town are mostly volunteer and seem to share quite of alot of resources with other nearby towns when required.

In short - I think you'll get over it The thing to watch is that every state is different so check out the town website - they have to list where all of the budget goes so you can see if its value for money or not.

kodokan

I'm of this mind about paying our HOA fees - I consider it just another tax, a way of paying for services like nice municipal landscaping and having the roads in good repair. If there weren't so many HOAs where we live, the property taxes would no doubt be a lot higher *shrug*

Jerseygirl

Hang on...NJ comes top of the list of the most expensive states for property taxes.