Navigating the Rising Tide of Property Taxes: What Homeowners Need to Know
Property taxes may not make up the largest portion of your monthly housing expenses, but they are increasingly straining household budgets. Homeowners have witnessed a staggering 27.4% increase in property tax payments since 2019, according to 2024 CoreLogic data. This surge may shed light on why 67% of homeowners who prepared for property taxes reported bills that were higher than expected this year, as revealed in a March survey by Ownwell. Notably, property taxes emerged as the most frequently underestimated expense among Gen Z homeowners, according to an Insurify poll. This data collectively suggests that rising property tax obligations are complicating financial planning for homeowners.
Understanding Property Tax Payments by State
The property tax burden varies significantly across the United States. According to 2023 Tax Foundation data, annual median property tax bills can range dramatically, from $9,163 in New Jersey (the highest) to a mere $786 in Alabama (the lowest).
It’s important to note that these median figures do not reflect individual home values or tax rates. The amount you pay is influenced by several factors, including local housing markets, state tax regulations, and local policies like tax exemptions or abatements.
In states that do not impose income taxes, property taxes often assume a greater role in funding public services. For instance, in Texas and New Hampshire, median property tax bills are among the highest in the country. On the other hand, states like Alaska and Nevada rely more on oil revenues or tourism for funding their services.
Interestingly, while California boasts some of the nation’s highest home prices, its median property tax bills remain relatively lower due to specific assessments caps and exemptions that favor owner-occupied homes. Similarly, Hawaii has elevated property values, but keeps tax bills manageable by utilizing a general excise tax instead.
Urban areas often experience higher property values because of limited space and increased demand, which subsequently raises property tax bills. In 2023, New York City’s median property tax bill was $9,937, while San Jose had a median of $9,554, according to a LendingTree study. These figures typically exceed the state-level median property taxes reported by the Tax Foundation.
Avoiding Unexpected Property Tax Bills
Due to the propensity for property taxes to be underestimated, they can often surprise homeowners as an unexpected financial burden. Reassessments may further escalate costs, making it crucial for prospective buyers to gauge potential future tax obligations proactively.
Key recommendations for avoiding tax bill surprises include:
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Review Historical Tax Bills: Investigate the past property tax bills for any home you are considering buying.
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Assess Tax Base Trends: Determine whether the town’s tax base is expanding or contracting, which can have direct implications on future tax changes.
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Know the Reassessment Schedule: Be informed about when the next property reassessment is expected.
As real estate agent Leo Pond notes, “Property taxes are often one of the most underestimated costs of homeownership.” To avoid being blindsided, he suggests budgeting an additional 5% to 10% beyond your expected bill to account for tax increases that commonly follow rising home values.
Conclusion
Understanding property taxes is essential for effective financial planning as a homeowner. With substantial increases in property tax bills since 2019, staying informed can help you manage budgets and avoid unwelcome surprises. Make it a priority to gather insights about your local property tax landscape, and consider the recommendations provided to navigate your obligations effectively.
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