Property tax in the US

[mellowyellowgirl]

Could someone kindly explain property tax in the US for me?

I was told by a person on another forum that your property taxes are really high and it can be a killer to inherit property because of all the tax.

Do you pay tax on your homes? Is it a lot? Do you pay tax on investment properties? Is that a lot too?

I was under the impression that it was some huge amount and people resort to renting because they can't afford property tax but then how can anyone be a landlord then because again there will be taxes.

Hoping someone can satisfy my curiosity!

 

[missy]

Could someone kindly explain property tax in the US for me?

I was told by a person on another forum that your property taxes are really high and it can be a killer to inherit property because of all the tax.

Do you pay tax on your homes? Is it a lot? Do you pay tax on investment properties? Is that a lot too?

I was under the impression that it was some huge amount and people resort to renting because they can't afford property tax but then how can anyone be a landlord then because again there will be taxes.

Hoping someone can satisfy my curiosity!

I am not an expert and can only speak from our experiences. Our beach house (NJ) property tax is super high but worth it because it's in a beautiful location and in this case you get what you pay for. Our property tax in NYC is combined with our coop maintenance so it is sort of hidden that way but it is getting more expensive each year. From what I can tell expensive property taxes are in the more desirable (for many) areas and less expensive property taxes exist in the areas less people want to live.

Now that varies wildly and is subjective. But if I were to move out to a rural area down South let's say (just as an example) I would pay significantly less in property taxes than what we pay now where we live. I like living near or in a city with cultural offerings and wouldn't want to be far away from that. But we pay the price for that.

If you own property (where you live or purely as an investment property) you have to pay taxes (as far as I know) in the USA. Period.

 

[mellowyellowgirl]

@missy do you think the tax is as much as the rent you would get? Not your property specifically but in general.

An old house in the suburbs in Australia if rented out for a year would fetch about $20,000 rent. Land tax here is about $1,000 to $2,000 per year.

I was under the impression it's a lot more than that in the US.

 

[Kaycee2018]

Property tax varies significantly throughout the US. Even within each state, different property taxes can be imposed (city, local taxes, etc). Our tax system is very complicated, so there is no simple explanation. Some jurisdictions grant partial property tax discounts (usually called exemptions) for homestead properties vs. income properties. Exemptions are also sometimes granted to seniors, veterans, first responders, etc. Property taxes are dependent on where the property is located. But as @missy noted, generally property taxes are higher in larger cities with more infrastructure vs. suburbs vs. rural. Inheritance tax is an entirely different issue.

 

[missy]

@missy do you think the tax is as much as the rent you would get? Not your property specifically but in general.

An old house in the suburbs in Australia if rented out for a year would fetch about $20,000 rent. Land tax here is about $1,000 to $2,000 per year.

I was under the impression it's a lot more than that in the US.

I don’t know all areas here re property tax and rent. Generally however I think buying (as long as one remains in the home for 5-7 years conventional wisdom) is a financially wiser option for the long run. Generally. And again I’m writing from personal experience. If one lives out in a rural area where the home might not appreciate as much it might make better financial sense to rent. I, for one however, love owning a home and doing what I need to in order to make it feel like our home. If you kwim. So not only for financial benefits but for quality of life reasons too I prefer home ownership. For us.

 

[missy]

Property tax varies significantly throughout the US. Even within each state, different property taxes can be imposed (city, local taxes, etc). Our tax system is very complicated, so there is no simple explanation. Some jurisdictions grant partial property tax discounts (usually called exemptions) for homestead properties vs. income properties. Exemptions are also sometimes granted to seniors, veterans, first responders, etc. Property taxes are dependent on where the property is located. But as @missy noted, generally property taxes are higher in larger cities with more infrastructure vs. suburbs vs. rural. Inheritance tax is an entirely different issue.

Yes I didn’t include tax deductions and such as that is much more complex an issue. As you wrote the entire topic is complicated. I was just answering @mellowyellowgirl as best I could.

 

[mellowyellowgirl]

Thanks guys! The person told me they paid $40,000 in property taxes which shocked me!

 

[missy]

Thanks guys! The person told me they paid $40,000 in property taxes which shocked me!

Not crazy imo. Unfortunately.

 

[Kaycee2018]

Thanks guys! The person told me they paid $40,000 in property taxes which shocked me!

Not unheard of. Highly dependent on the size of the property, where it is located, what (if any) exemptions it qualifies for, etc.

 

[Karl_K]

This will help:

Property tax varies by state. Here's a look at what you'll pay

Can I deduct property taxes in 2018? Yes, but the new tax law has some fine print, you need to know. Here's a guide to property taxes in your state.

www.usatoday.com

There are people being taxed out of their homes.
I know people with fully paid for houses that the taxes are way more than they were paying for their mortgage over the years in the Chicago burbs.
Mainly because housing prices have shot up so much over the years.
They may have paid 60k for a house that is selling for $600000 today.
Yes, they can sell it and on paper make a profit but that does not help when you can not afford to live in your own house.

 

[mellowyellowgirl]

That's really awful Karl!

So they are driven to lose their homes?

Basically you work not to pay the mortgage but to pay the taxes to live in your house? That's awful!!!!!

 

[redwood66]

@mellowyellowgirl the taxes on homes are generally in the vicinity of 1% of the home value but can be more in urban areas when all other taxes are added into the pot. The rising valuations and taxing structure in many areas has created the problem @Karl_K described.

 

[missy]

This will help:

Property tax varies by state. Here's a look at what you'll pay

Can I deduct property taxes in 2018? Yes, but the new tax law has some fine print, you need to know. Here's a guide to property taxes in your state.

www.usatoday.com

There are people being taxed out of their homes.
I know people with fully paid for houses that the taxes are way more than they were paying for their mortgage over the years in the Chicago burbs.
Mainly because housing prices have shot up so much over the years.
They may have paid 60k for a house that is selling for $600000 today.
Yes, they can sell it and on paper make a profit but that does not help when you can not afford to live in your own house.

True. And that is why when one is house shopping one is told not to buy more than one can afford. Meaning you might be able to purchase the home but can you afford the property tax and all the associated expenses? Common sense. And property tax can go up quite a bit it’s true. One can not predict with certainty how much. But always buy within and generally under their means. It’s the smartest way. Only purchase a home you can comfortably afford. And property tax is usually a percentage of the home purchase price but that varies.

I share your frustration about life being super expensive even more so now than ever before. It is a crying shame that people are being driven out of their homes.

I purchased my first home in 1995 and I sold it for four times the purchase price in 2004 which allowed us to purchase our current home. It’s a very good way to earn money if done with common sense and if well within your means. Now that first home is easily double what I sold it for. And so is our current NYC home if we were to sell it. Our maintenance has increased by 3% every year. That includes our property tax.

 

[Karl_K]

That's really awful Karl!

So they are driven to lose their homes?

Basically you work not to pay the mortgage but to pay the taxes to live in your house? That's awful!!!!!

It has forced many to sell.
There are programs to reduce it if you meet some very strict guidlines but many do not qualify.

 

[redwood66]

 

[missy]

 

[asscherisme]

@mellowyellowgirl the taxes on homes are generally in the vicinity of 1% of the home value but can be more in urban areas when all other taxes are added into the pot. The rising valuations and taxing structure in many areas has created the problem @Karl_K described.

It really varies on where you live. Property taxes pay for various services of the city/town they are in with the largest chunk going to fund public schools. It is actually an unfair system because this means that areas with higher value homes have better schools because they collect higher property taxes.

1% sounds very low to me. I live in the suburb of a major U.S. city and purchased my home in 2018. I pay 2.1% of the value of my home in property taxes annually.

Karl makes a good point that goes along with what I am saying, property taxes are based on the value of your home. So those who have been in their homes forever and have seen its value rise also see property taxes rise. It is a sad situation. So homes may have risen in value, but if you don't plan on selling and just want to live in your home, you are priced out.

I disagree that renting is always the best decision. I rented after my divorce and I found that rent in my town was rising much faster than home prices and I actually pay $500 LESS a month owning, even factoring in home repair expenses, property taxes, etc. Plus the peace of mind of not being at the whim of a landlord. My home is in MUCH better shape and in a better neighborhood that homes with higher rent than I am currently paying.

I am planning on moving in 5 or 6 years and the area I am moving to, the property values tend to be closer to 1% of the value of the home. While that sounds good, the income tax for the state I am moving to is almost double where I currently live. So, if you are not taxed one way, you will be taxed another and the net effect on my income will end up being the same. Lower property tax but higher state income tax will balance each other out.

$40,000 in property tax is insane and sounds like a very very expensive home that a wealthy person would live in.

 

[asscherisme]

So, so so true!

 

[asscherisme]

Could someone kindly explain property tax in the US for me?

I was told by a person on another forum that your property taxes are really high and it can be a killer to inherit property because of all the tax.

Do you pay tax on your homes? Is it a lot? Do you pay tax on investment properties? Is that a lot too?

I was under the impression that it was some huge amount and people resort to renting because they can't afford property tax but then how can anyone be a landlord then because again there will be taxes.

Hoping someone can satisfy my curiosity!

Speaking of inheritance, I know a family that inherited a large lot with an old home on it. They were hit with high property taxes. They didn't want the home but didn't want to get rid of the land. So, they knocked down the house and it lowered their property tax to a very low number because the structure was being taxed. They are now thinking of selling the land.

 

[redwood66]

It really varies on where you live. Property taxes pay for various services of the city/town they are in with the largest chunk going to fund public schools. It is actually an unfair system because this means that areas with higher value homes have better schools because they collect higher property taxes.

1% sounds very low to me. I live in the suburb of a major U.S. city and purchased my home in 2018. I pay 2.1% of the value of my home in property taxes annually.

Karl makes a good point that goes along with what I am saying, property taxes are based on the value of your home. So those who have been in their homes forever and have seen its value rise also see property taxes rise. It is a sad situation. So homes may have risen in value, but if you don't plan on selling and just want to live in your home, you are priced out.

I disagree that renting is always the best decision. I rented after my divorce and I found that rent in my town was rising much faster than home prices and I actually pay $500 LESS a month owning, even factoring in home repair expenses, property taxes, etc. Plus the peace of mind of not being at the whim of a landlord. My home is in MUCH better shape and in a better neighborhood that homes with higher rent than I am currently paying.

I am planning on moving in 5 or 6 years and the area I am moving to, the property values tend to be closer to 1% of the value of the home. While that sounds good, the income tax for the state I am moving to is almost double where I currently live. So, if you are not taxed one way, you will be taxed another and the net effect on my income will end up being the same. Lower property tax but higher state income tax will balance each other out.

$40,000 in property tax is insane and sounds like a very very expensive home that a wealthy person would live in.

It does all depend on where you live, we agree. Our property taxes are low but income tax is higher. "They" get you one way or another.

 

[Ally T]

Oh my goodness, may I ask what these extortionate property taxes are actually for? And how is their amount justified?? How does it make ANY legal & logical sense that you can actually own your own home, mortgage free, and then have to pay an ongoing tax that is so high may force you to sell?? Is this tax like your water rates, heating & road repairs??

I am in shock that as @Karl_K has said, many people are taxed out of their own homes

Here in the UK we pay what is called an annual Council Tax, which whilst does go on the value of the area your property is situated in, would never be enough to force you to sell up. I find that really disturbing. For example, we live in a 4 bedroomed property in an affluent area, and my yearly tax is only £2,400. That goes to cover local Council costs, so road repairs, public space maintenance in my area, street lighting etc.

 

[redwood66]

Our area has turned into a resort community with a large beautiful lake. There are many elderly people whose family owned property along the lake for decades and have had to sell because they could not afford the taxes. We have a homestead exemption in our state but it isn't even a drop in the bucket when the valuation has risen 100 fold or more.

 

[Karl_K]

Another thing that has happened is that after the mortgage mess of 2008 many people with good jobs and good credit and a bit of money in the bank took the opportunity to buy a house at the lower prices.
They had the property accessed to lower the taxes to current values.
Now that the housing prices are trending up the the county/city are doing a tax assessment yearly and raising the taxes back up.
I know people that their taxes have more than doubled in the last 2 years.
It used to be on average they were doing them every 5 to 7 years around here. They changes the law to make it much less work to change the accessemt including using google earth to access any land improvements.

 

[redwood66]

Oh my goodness, may I ask what these extortionate property taxes are actually for? And how is their amount justified?? How does it make ANY legal & logical sense that you can actually own your own home, mortgage free, and then have to pay an ongoing tax that is so high may force you to sell?? Is this tax like your water rates, heating & road repairs??

I am in shock that as @Karl_K has said, many people are taxed out of their own homes

Here in the UK we pay what is called an annual Council Tax, which whilst does go on the value of the area your property is situated in, would never be enough to force you to sell up. I find that really disturbing. For example, we live in a 4 bedroomed property in an affluent area, and my yearly tax is only £2,400. That goes to cover local Council costs, so road repairs, public space maintenance in my area, street lighting etc.

Property taxes are for local city or county coffers for roads, schools, fire protection, police, administration, and any initiatives, bonds or programs the local voters have approved.

Taxes also go to any public utilities the property uses as well.

 

[pearlsngems]

Property tax here is based on a mill rate (one mill is $1 per $1000 of assessed property value) and the rate varies from town to town and even by district. The mill rate can change, and taxes can go up if you improve your property. For example, we redid our bathroom a few years ago and that caused our assessment (and our taxes) to increase.

One also pays property tax on motor vehicles and boats. The tax decreases as the motor vehicle depreciates.

Our property tax has more than doubled in the 25 years we have lived here, but our house is small so the taxes will still be affordable after we retire. My husband is a veteran so he gets a small break. People whose income falls below a certain amount get a small break also.

A former neighbor a few doors down from us was unable to pay her property tax one year after her husband had a stroke, and the town put a lien on her house!

 

[MaisOuiMadame]

O m gee... I'm shocked.Our home would fetch about 50 k in rent and we pay 2700€ in property taxes. It is used for our community , so our affluent 8 k people village has a sports centre, two schools, a crèche and rubbish is collected 3x a week. We have a senior citizen centre with lots of activities, too. We know where those euros are spent...

 

[joelly]

Thanks guys! The person told me they paid $40,000 in property taxes which shocked me!

Wow that’s high. That must be a mansion.

I am a homeowner in a highly desired area and high cost of living as well. We pay $6,500 in property tax every year. Our house is about 1,800 square feet.

If rented, our house would fetch $36K-$42K a year.

 

[voce]

Annual property taxes are in the 1-2%-ish range, depending on where you live. This applies regardless of homes you live in or investment properties. My parents are paying around $20,000 per year on their taxes, hence I'm trying to get them to sell and downsize so they can spend their money on useful things. They're in semi retirement right now.

I was told by a person on another forum that your property taxes are really high and it can be a killer to inherit property because of all the tax.

I think whenever you inherit property, inheritance/estate tax can potentially take away WAY more than property tax. Here is more information on the federal estate tax.



If you're wealthy, then get used to taxes. I feel sorry for the family farms where the land is valued in millions of dollars but the cash flow generated is not sufficient to cover taxes when the owner dies.

However, in the past decade the estate exemption has increased drastically.

 

[Ally T]

Property taxes are for local city or county coffers for roads, schools, fire protection, police, administration, and any initiatives, bonds or programs the local voters have approved.

Taxes also go to any public utilities the property uses as well.

Thank you for explaining. So your Property Tax is EXACTLY the same as our Council Tax, which leaves me stunned that it can be so disproportionately high?! Perhaps the roads & public buildings there are studded with diamond dust

 

[Karl_K]

Perhaps the roads & public buildings there are studded with diamond dust

One school district in one of the very high tax areas redid the bathrooms in one of the high school over the summer.
The spent over $1 million dollars over the cost of chrome plated facets for 18k gold plated models.
In high school bathrooms!