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How much are your property taxes compared to your household income/FIRE budget?
Old 09-26-2013, 02:30 AM   #1
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How much are your property taxes compared to your household income/FIRE budget?

Hi:

I live in New Jersey, a state with high property taxes.

Based on my current income (I am not yet FIRE) my property tax is 5.9 percent of my annual pre-tax income.

Based on my predicted FIRE annual budget, my property tax will be approximately 15.3 percent of the FIRE annual budget. My FIRE annual budget is less than my current annual income. This percent seems very high and I question whether I can FIRE for the long term in New Jersey based in part on the high property taxes.

There are a number of reasons why I would like to stay here. My friends and family are here. I like being close to NYC. I like the Jersey Shore. I like having four seasons, etc. My professional license is in this state.

That leads me to some questions. First, I would like to know what percent of your annual income/FIRE annual budget is comprised of property tax.

Aside from relocating, can you think of ways that I could reduce the percent of my FIRE budget that property taxes will represent. I live in a fairly modest home and the property tax is on the lower side of average for New Jersey.

I appealed my property tax assessment and negotiated a settlement with county. But the new assessed value does not reduce the property tax amount significantly.

If I rented, I would not be directly responsible for property taxes, but the cost would be built into the rent payment. And since I got a mortgage at a very low rate of interest, my mortgage payment and property tax payment for the house is about the same amount as monthly rent on a much smaller apartment.

I appreciate your insight.
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Old 09-26-2013, 03:00 AM   #2
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2.7% of the basic budget.
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Old 09-26-2013, 03:07 AM   #3
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Estimated (not yet RE) to be about 3.5% of basic RE budget.
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Old 09-26-2013, 04:05 AM   #4
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3.1 % in MN
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Old 09-26-2013, 04:13 AM   #5
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I think you have to balance this with income taxes and sales taxes. In MN, our property taxes are lower than many states, but our income taxes are high. Then of course is the whole issue of value of the home. I can have a high value home (thus higher taxes) and not much "income" in retirement if I am living off savings and dividends for example.
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Old 09-26-2013, 04:38 AM   #6
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If you are hesitant to move for the reasons mentioned property tax is just another bill that has to be paid as it is unavoidable. mine is 3.7 percent. Iowa
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Old 09-26-2013, 04:39 AM   #7
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My current property taxes are $7500/yr in Cocoa Beach FL which represents 8.93% of my annual ER budget (after Federal taxes). It currently represents 2.5% of my annual income before Federal taxes.
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Old 09-26-2013, 06:31 AM   #8
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Live in semi-rural Western Ma., 3.5% of pre retirement gross, about 5% of post retirement. Tax rate is 15.5.
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Old 09-26-2013, 06:57 AM   #9
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Here on Long Island (NY), property taxes are huge. Net of a state school (property) tax rebate, I pay about $2,000 in property taxes on a co-op studio apartment. That is about 10% of my ER budget and just over 5% of my gross (investment) income.
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Old 09-26-2013, 07:02 AM   #10
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I'm also in Mass.

% of working income: 2%
% of estimated retirement budget (not RE yet): 8.5%
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Old 09-26-2013, 07:03 AM   #11
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nico..I too live in NJ and pay ridiculous amount in property taxes. It's about 7% of my current salary. It'll be close to 11-12% of my FIRE withdrawal rate.
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Old 09-26-2013, 07:04 AM   #12
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Quote:
Originally Posted by nico08 View Post
Hi:

I live in New Jersey, a state with high property taxes.

Based on my current income (I am not yet FIRE) my property tax is 5.9 percent of my annual pre-tax income.

Based on my predicted FIRE annual budget, my property tax will be approximately 15.3 percent of the FIRE annual budget. My FIRE annual budget is less than my current annual income. This percent seems very high and I question whether I can FIRE for the long term in New Jersey based in part on the high property taxes.

There are a number of reasons why I would like to stay here. My friends and family are here. I like being close to NYC. I like the Jersey Shore. I like having four seasons, etc. My professional license is in this state.

That leads me to some questions. First, I would like to know what percent of your annual income/FIRE annual budget is comprised of property tax.

Aside from relocating, can you think of ways that I could reduce the percent of my FIRE budget that property taxes will represent. I live in a fairly modest home and the property tax is on the lower side of average for New Jersey.

I appealed my property tax assessment and negotiated a settlement with county. But the new assessed value does not reduce the property tax amount significantly.

If I rented, I would not be directly responsible for property taxes, but the cost would be built into the rent payment. And since I got a mortgage at a very low rate of interest, my mortgage payment and property tax payment for the house is about the same amount as monthly rent on a much smaller apartment.

I appreciate your insight.
Your taxes are low considering the state we live in. Yes, you earn more in NJ, but real estate and other taxes might wear you down in retirement.

My brother is a tax preparer and accountant. He always planned for the day he would move elsewhere (picked MD). Everything in his budget is significantly lower.

We went the route of tax appeal also. Very disappointed as you are.

There is a premium to pay for living near NYC and the beach. No way to negotiate a lower premium, unfortunately.

Our percentage is more than double yours, but we calculated that a minor move to a cheaper county, smaller home, etc., just wouldn't change the final result: NJ is not retirement-friendly.

So we will continue to enjoy the house and surrounding environment, make some improvements, and move out of the state when we get closer to our date(s).
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Old 09-26-2013, 07:18 AM   #13
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about 3.5%
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Old 09-26-2013, 07:21 AM   #14
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About $7K/year here in Austin, Texas on a valuation of $300K. That will be about 7% of my post retirement spending. A bit tough to compare state-to-state, though, with state taxes (or not). It's a real problem here since, even with outright home ownership, you could easily be paying $600 - $1,000/month in property taxes. One thing we know is that they won't go down.

However, I use a service (Protax, I think it is - I have no affiliation with them other than being a customer) that automatically protests my taxes every year. If my taxes go down (or, more precisely, do not go up by the amount that the government says they should), then I pay them 10% of the savings. If my taxes don't go down, I don't pay them anything. Yes, I expect I could protest on my own, but since they are the experts, I let them handle it. I don't think there has been one year where they didn't save me something.
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Old 09-26-2013, 07:27 AM   #15
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Old 09-26-2013, 07:53 AM   #16
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0.69% of total income, Line 38 of 1040, MS, with homestead exemption and disability discount.
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Old 09-26-2013, 08:02 AM   #17
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2.1%, on tiny house, big acreage, a great view, and no neighbors.
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Old 09-26-2013, 08:21 AM   #18
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Currently 4.5% of income (still working)
Would be 7.6% of retirement income

Planning to relocate out of California at retirement
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Old 09-26-2013, 09:52 AM   #19
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2.2% of retirement income here in MO. It is escrowed out of monthly mortgage payment.
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Old 09-26-2013, 10:14 AM   #20
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We just purchased (closing tomorrow) our retirment home in Bossier City, LA. Purchase price is $212,000. Property taxes (city & parish) will be $1584, which represents 3.6% of our planned initial after-tax budget. After the first couple of years, our budget may increase a bit due to some tweaks here & there which will increase income, but that's where we're starting.
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