How much are your property taxes compared to your household income/FIRE budget?

[dmdunca44]

Our property taxes are 2% of our gross income. However we have a hefty state sales tax (over 95)

 

[ERD50]

Thats crazy - What kind of Alchemy is used by the assesors office?

It may just be arithmetic, no alchemy at all.

For many (most? all the ones I've lived in) municipalities, the assessed value is just one part of the equation. The other is the total tax amount for the municipality. So the assessed value is just a way to split the total bill up across all taxpayers. Imaginary examples:

Imagine a municipality with only two homes. Each is assessed at $500,000, and the total tax bill for the municipality is $10,000. So they each pay $5,000. Next year, each is assessed at $450,000, but taxes have increased to $12,000 total. So they each pay $6,000. So the tax bill goes up, even though assessed value went down.

I discussed this with my County tax assessor, and she said that was right, and that very few people actually understand this. But your municipality may be different.

-ERD50

 

[KingB]

It may just be arithmetic, no alchemy at all.

For many (most? all the ones I've lived in) municipalities, the assessed value is just one part of the equation. The other is the total tax amount for the municipality. So the assessed value is just a way to split the total bill up across all taxpayers. Imaginary examples:

Imagine a municipality with only two homes. Each is assessed at $500,000, and the total tax bill for the municipality is $10,000. So they each pay $5,000. Next year, each is assessed at $450,000, but taxes have increased to $12,000 total. So they each pay $6,000. So the tax bill goes up, even though assessed value went down.

I discussed this with my County tax assessor, and she said that was right, and that very few people actually understand this. But your municipality may be different.

-ERD50

+1
While other taxing government tries to cut down expenses in anticipation of decreased revenues or already depressed revenues, others will count on the taxpayers to fund their expenses. They really don't have any incentive to cut down cost - taxpayers will always provide.

 

[kmt1972]

Well, in NY state back in 2011, a law was passed with pretty much capped increase in property taxes to 2%. Although there are all kinds of loopholes and since the 2% is for overall tax any one property could experience tax increase greater than 2%. Still this cap does slow down the increase in property taxes last couple of years, especially in high tax areas like Westchester County where I live.

 

[pb4uski]

....Imagine a municipality with only two homes. Each is assessed at $500,000, and the total tax bill for the municipality is $10,000. So they each pay $5,000. Next year, each is assessed at $450,000, but taxes have increased to $12,000 total. So they each pay $6,000. So the tax bill goes up, even though assessed value went down.

I discussed this with my County tax assessor, and she said that was right, and that very few people actually understand this. But your municipality may be different.

-ERD50

Yup, that's the way it works. Total budget divided by grand list = tax rate and tax rate * your assessed value = your tax bill.

 

[imoldernu]

Illinois
w/homestead exemption and sr. tax freeze, 5% Budget.

Reminder.. in CCRC living, this is one of the expenses that disappears.

 

[JoeWras]

Yup, that's the way it works. Total budget divided by grand list = tax rate and tax rate * your assessed value = your tax bill.

Right, but part of the Illinois "alchemy" is that they are one of the states that uses a strange "taxable value" number that does not match reality.

Other states use real market data. In NC, they reassess every few years, so the data can get stale, but was at least correlated to actual market value one time. Other states reassess every year to market value.

But for Illinois? That assessed value is very strange in relation to market values. It is just a fraction of market value.

 

[ERD50]

Right, but part of the Illinois "alchemy" is that they are one of the states that uses a strange "taxable value" number that does not match reality.

Other states use real market data. In NC, they reassess every few years, so the data can get stale, but was at least correlated to actual market value one time. Other states reassess every year to market value.

But for Illinois? That assessed value is very strange in relation to market values. It is just a fraction of market value.

First, I'm not sure it's an 'Illinois' thing - my property taxes are paid to my local county, districts (Fire, Library, School, etc) and my city. Maybe state law defines some of this, I don't know.

My bill clearly states that asses value is 1/3 'market value' - so just multiply by 3. When I do that, I get a reasonable estimate of my market value. And you can request an adjustment based on that number. I think that 1/3 number may be an equalizer for commercial or other property types that get a different multiplier, but I'm not sure?

It seems my place is re-assessed each year. Again, I think this is specific to the county, it may not be state-wide.

-ERD50

 

[JoeWras]

First, I'm not sure it's an 'Illinois' thing - my property taxes are paid to my local county, districts (Fire, Library, School, etc) and my city. Maybe state law defines some of this, I don't know.

My bill clearly states that asses value is 1/3 'market value' - so just multiply by 3.

Yeah. Every state, county and municipality has a spin. Add all 3, and you get a small chemical reaction.

But in general: the state seems to set the tone with certain laws, and from there the lower governments do their thing. In NC each county has different re-evaluation periods, for example. The state sets a minimum standard.

As for the 1/3, that's interesting. I may have missed something like that on my Dad's bill. Not sure. Other states have funny evaluation numbers too, from what I've heard.

The point is some states have very straightforward ways of assessing and conveying that information. This helps in challenges. It is just easier to understand, that's all.

 

[Sue J]

Ours are 6.2% of income but our income is quite low. I feel our taxes are very manageable since we have no mortgage.

I was looking forward to our states homestead exemption at age 65 which exempts the first $25,000 of value from taxation. But our governor recently ended that if your income is over $30,000 a year. There is a grandfather provision in there that allows my sister and brother-in-law to retain their exemption since he is already over 65, even though his income is many multiples of $30,000. Of course, their taxes are 4 times what ours are. I guess it all works out in the end.

 

[FANOFJESUS]

Yet ! States broke. BTW 5% isn't insignificant when everything else has gone up including having to pay tolls to drive anywhere.

IL is one high state to live in. Once you retire IN looks good since it is so close.

 

[siamond]

Roughly 7% of planned retirement income. Boston suburb.

Hm. I never paid attention to the fact that it will be that high (it's significantly lower compared to our current pre-retirement gross income). Room for thought...

 

[CherylGrrl]

Here in Nevada I'm at about 3.5%, plus no income tax. So glad I left California 13 years ago!

 

[House Divided]

Property tax here in Alabama is very reasonable I pay 400/yr for my primary residence in north central part of the state and 200/yr for property in Orange Beach by the gulf. So in total I am about 1.2% of gross income. And after age 65 there is another exemption on your primary residence not bad, but you had better like hot summers!

 

[doxiemama]

$5,000 per year in San Diego = 5% of working income.

This would be almost 10% of retired income. Even with Prop. 13, there will be increases of $100 per year and I keep getting hit with school bonds, expect an increase this year of $270 just the latest school bond.

I figure 10 years from now would be looking at $6,500 to $7,000 for my 70 year old house, that is expensive to maintain, (constant plumbing and electrical issues) and is only 865 square feet.

We are seriously house hunting in Northern Arizona and Southern Nevada, where we could buy a new house, for 1/3 the cost of what we live in, and taxes will be far less.

 

[BigE]

Not yet retired myself. Moving out of a high tax location like New Jersey is the best fiscal option, but your post indicates your desire to stay there is high...so what about trying to maximize schedule A deductions in retirement to decrease tax burden (such as bunching property taxes for two years in one and timing health care expenditures, etc.). I live in a low tax state but unfortunately in a large house so I plan to maximize schedule A deductions until we downsize.

 

[RetiringAt55]

IL is one high state to live in. Once you retire IN looks good since it is so close.

IN is not necessarily cheaper than IL when you consider retirement income tax. If IL changes their laws on not taxing retirement income, then we would consider moving.

Our property taxes in IL are $12K which is 10% of our current budget.

 

[ikubak]

College town in Alabama

$950 on a $200K house