You don’t need to be a buyer or seller in today’s crazy real estate market to be affected by it. The jump in home prices — 16 percent nationwide over the past year, and even higher in certain areas — threatens increases in property taxes for entire neighborhoods. So not only does a new homebuyer face potentially higher monthly costs than the listing suggested, but it also could mean a new financial strain for established homeowners.
Additional pressure to raise property taxes comes from the stores closed and offices vacated in the pandemic. “Residential values are rising, commercial values are falling, so your share of the total local budget could increase,” says Daphne A. Kenyon, resident fellow in tax policy at the Lincoln Institute of Land Policy.
“Property taxes are one of the biggest concerns people have as they near retirement age,” says Michelle McBride, past president of the National Association of County Collectors, Treasurers & Finance Officers. “It’s a smart thing to pay attention to.” Whether you’re house hunting or staying put, keep these points in mind.
Location is everything
Property taxes are relatively simple: An assessor employed by the local government determines the value of your home, then you pay a percentage of that value in taxes. But the impact of these taxes is far from uniform. Tax rates vary widely from state to state, and even from town to town.
Consider, for example, a house currently priced at $350,000 in the Cleveland, Ohio, suburb of Beachwood. It had a 2019 property tax bill of $5,300. In the adjacent town of Shaker Heights, a similar house had a bill of $10,200 — almost double that of the home just over a mile away. But travel to Montgomery, Alabama, and an even larger home selling for $400,000 had an annual property tax bill of only $1,300.
Generally speaking, property tax rates tend to be higher in urban areas, in regions with fewer commercial establishments to tax, in communities with well-funded public schools and in states with lower income taxes. In virtually all areas, condominium apartments are taxed at the same rate as stand-alone houses.