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New owner's property tax liability much higher than current owners.
Old 11-20-2020, 09:12 AM   #1
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New owner's property tax liability much higher than current owners.

Looked at a couple of properties in Florida on Zillow/Realtor. The seller's property tax liability was around $2400-$2700 a yr (I looked on the assessors page to verify) which I could easily afford with my modest retirement cash flow. Calculating what I would have to pay if I bought these properties came out to around $12K-13K a year, too high for my retirement cash flow. I'd expect to pay more than the current owner, but 4x as much?

The selling prices were $600K-$700K. In one case, the assessors market value was around half the asking price with the taxable amount of around $200K (3% cap a year), less the $50K homestead for a final taxable value of around $150K.

The nearly double asking price vs market value assessment seems to be part of this years spike in demand for houses with sub 3% interest rate.

It seems like one must buy a cheaper house with a lower P&I payment to have the same house payment as before. In the example above, how much principle & interest is $750mo at 2.65% over 30 years? (rhetorical question to make a point).


Anyone recently moved house and have got a property tax shock?

Have you decided to stay in your greatly appreciated home because of your current lower tax liability compared to what it would be if you moved to a bit more expensive home?

Did you sell to take advantage of the increase in your house value but moved down to a lower priced home or go full time RVing to not get stung on the next property tax bill reset?

Other thoughts on high property tax rates for new owners?


Thanks
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Old 11-20-2020, 09:24 AM   #2
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Looking at the whole picture is usually the best option.

We moved a few years ago and our property taxes went up by a huge amount.
But our state income tax went down by a similar amount.
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Old 11-20-2020, 09:26 AM   #3
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It appears that you are seeing/assuming that your property tax assessment will be bumped up to what you pay for the property. Is that correct?

I have not seen this happen in other markets, as assessors are supposed to normalize sales with average properties in the neighborhood - not just use a sale to bump things up.

Yes, eventually increased sales will increase taxes. It should take a few years.
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Old 11-20-2020, 09:43 AM   #4
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The issues of property taxes and reassessment are very state specific. Some states (such as NJ) require each municipality to reassess every property every 7-10 years to bring all assessments close to fair market value. Other states (such as many counties in PA) simply do not reassess and you keep your old assessment, such that a new house worth $500,000.00 could pay triple the taxes of an old home worth the same amount.

My house in NJ is reassessed every 7 years but there has been no reassessment in our county in Pennsylvania (primary residence) since 1971. Never understood how this is constitutional but that is a story for another day. Other states only reassess upon a sale and certain states are limited concerning increases in property taxes by voter initiatives such as California.

My point being that in our system of federalism this issue varies widely from state to state.
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Old 11-20-2020, 09:48 AM   #5
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I'm not sure it's statewide, but my calculations for when I bought my aunt's house in Fort Lauderdale went awry because, as a non owner-occupier, I didn't get the homestead exemption. It was a charity move, and although it hit my cash flow harder than I planned, it wasn't a big deal. Then I got lucky in that the 55+ rule was overturned and the price shot up for the later sale. But the point was it's not always easy to figure your taxes by a casual look.
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Old 11-20-2020, 09:52 AM   #6
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We went the "other direction," so to speak.

1. We moved from HCOL to LCOL
2. In so doing, we sold our greatly appreciated HCOL home. We had owned it for 25 years. When we cashed out of HCOL, the value in that property nearly equaled what we then had in savings. In other words, a buy-and-hold home strategy in HCOL nearly doubled our NW over a 25 year period. As a result, I'm a big fan of home ownership in HCOL markets. YMMV, and all real estate is local, of course.
3. A result of #2 was that nearly all our of costs decreased by at least 50%, and in some cases by much more (including property taxes). We are also in a jurisdiction with no state income tax. Thanks to a moving van, our living expenses were slashed.
4. We put the proceeds of #2 into the market, and since that time the proceeds of our (now former) HCOL house have been working for us, instead of the reverse. Until we cashed out, I was w*rking for that HCOL house. Now, that puppy is w*rking for me, at least that is how I see it.
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Old 11-20-2020, 10:22 AM   #7
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Quote:
Originally Posted by Z3Dreamer View Post
It appears that you are seeing/assuming that your property tax assessment will be bumped up to what you pay for the property. Is that correct?

I have not seen this happen in other markets, as assessors are supposed to normalize sales with average properties in the neighborhood - not just use a sale to bump things up.

Yes, eventually increased sales will increase taxes. It should take a few years.
In many jurisdictions, Kentucky being one of them, when a property is sold the sales price becomes the newly assessed value for the next year's tax bill since that is considered to be the fair market value.
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Old 11-20-2020, 10:31 AM   #8
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Originally Posted by Camping View Post

Anyone recently moved house and have got a property tax shock?

Other thoughts on high property tax rates for new owners?


Thanks
Our property tax shock in Florida has been gradual. We bought a condo in 2011 in Palm Beach County. This is what has happened to our property taxes over the past 9 years. The amount paid includes a 2% discount for paying in full by the 30th of November.

2011 - $1872.52
2012 - $1861.74
2013 - $1842.25
2014 - $2059.45
2015 - $3533.95
2016 - $4152.68
2017 - $4381.05
2018 - $4618.53
2019 - $5349.34
2020 - $5508.22

The value of our condo has quadrupled since our purchase in 2020 but the taxes are still higher than our 5 bedroom home in Southern California which is valued 4.7 time higher than our condo in Florida.

The condo fees have been relatively stable:

2011 $604.41/month
2012 $603.20
2013 $562.39
2014 $551.83
2015 $553.20
2016 $599.53
2017 $561.27
2018 $596.95
2019 $599.58
2020 $634.25

The condo fees include 24/7 building security, building maintenance, water, building insurance, cable TV, high speed internet, use of amenities (pool, fitness center, movie theater, common areas), and reserves. The valet parking was ditched in 2013 along with free coffee for all residents in 2016.

The other issue you need to consider is home insurance. It is extremely expensive in Florida especially in the coastal areas where we are.
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Old 11-20-2020, 10:51 AM   #9
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In Florida they reassess property values every year. If you buy during an upturn, your tax will be assessed based on current values. Then you can apply for homesteading, which won't reduce your tax by much, but will keep it from going up quite so fast. The original owners would have benefited from that.

We are paying ~ 50% more tax than the original owners were paying on a home they had owned for 15 years. It's actually about the same as we were paying in Maryland, so wasn't a shock to the budget. More than offset, too, by the lack of a state income tax.

I do think the difference you cite is rather striking. Had the original owners owned the properties for 30-40 years? That could account for it.

Quote:
Originally Posted by Camping View Post
Looked at a couple of properties in Florida on Zillow/Realtor. The seller's property tax liability was around $2400-$2700 a yr (I looked on the assessors page to verify) which I could easily afford with my modest retirement cash flow. Calculating what I would have to pay if I bought these properties came out to around $12K-13K a year, too high for my retirement cash flow. I'd expect to pay more than the current owner, but 4x as much?

The selling prices were $600K-$700K. In one case, the assessors market value was around half the asking price with the taxable amount of around $200K (3% cap a year), less the $50K homestead for a final taxable value of around $150K.

The nearly double asking price vs market value assessment seems to be part of this years spike in demand for houses with sub 3% interest rate.

It seems like one must buy a cheaper house with a lower P&I payment to have the same house payment as before. In the example above, how much principle & interest is $750mo at 2.65% over 30 years? (rhetorical question to make a point).


Anyone recently moved house and have got a property tax shock?

Have you decided to stay in your greatly appreciated home because of your current lower tax liability compared to what it would be if you moved to a bit more expensive home?

Did you sell to take advantage of the increase in your house value but moved down to a lower priced home or go full time RVing to not get stung on the next property tax bill reset?

Other thoughts on high property tax rates for new owners?


Thanks
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Old 11-20-2020, 10:55 AM   #10
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In my area they freeze prop tax at a certain age. And there are a host of exemptions. You really have to dig in the county page and do analysis on a prop to attempt to see what YOUR tax would be on same property. Never ever trust Zillow. you could be off by literally 10s of thousands $. We talked to the assessors office multiple times while buying and still sweated a little until the first true tax bill came
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Old 11-20-2020, 11:01 AM   #11
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Quote:
Originally Posted by Freedom56 View Post
Our property tax shock in Florida has been gradual. We bought a condo in 2011 in Palm Beach County in 2011. This is what has happened to our property taxes over the past 9 years. The amount paid includes a 2% discount for paying in full by the 30th of November.

2011 - $1872.52
2012 - $1861.74
2013 - $1842.25
2014 - $2059.45
2015 - $3533.95
2016 - $4152.68
2017 - $4381.05
2018 - $4618.53
2019 - $5349.34
2020 - $5508.22

The value of our condo has quadrupled since our purchase in 2020 but the taxes are still higher than our 5 bedroom home in Southern California which is valued 4.7 time higher than our condo in Florida.

The condo fees have been relatively stable:

2011 $604.41/month
2012 $603.20
2013 $562.39
2014 $551.83
2015 $553.20
2016 $599.53
2017 $561.27
2018 $596.95
2019 $599.58
2020 $634.25

The condo fees include 24/7 building security, building maintenance, water, building insurance, cable TV, high speed internet, use of amenities (pool, fitness center, movie theater, common areas), and reserves. The valet parking was ditched in 2013 along with free coffee for all residents in 2016.

The other issue you need to consider is home insurance. It is extremely expensive in Florida especially in the coastal areas where we are.



My home in Duval County (Jacksonville) Florida is currently worth a little more than 3X what we paid for it.


Here are my last 11 years of property taxes starting with 2010 on the top.


$1,596.00
$1,661.86
$1,733.83
$1,861.09
$1,889.16
$1,888.35
$1,871.53
$1,888.20
$1,918.00
$1,948.44
$1,977.24


Mike
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Old 11-20-2020, 11:03 AM   #12
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In Nevada the age of the house is figured into the equation. Also increases are capped at 3%. So when we moved from a 20 year old house to a 60 year old one we paid a third. We only pay 770/year on a 400k house.
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Old 11-20-2020, 11:27 AM   #13
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Keep in mind that states that have low or no income tax, or that (like PA) subsidize large groups of people (e.g. no income tax on SS or military pensions), have to get money from somewhere. Property taxes are an attractive target, because they are progressive. The more money people have, the more expensive a home they usually buy, and they can afford higher taxes on it.
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Old 11-20-2020, 11:29 AM   #14
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Here, they are supposed to re-assess properties every four years, but in reality they generally wait until the property sells and then assess it at the selling price. So, if someone owns a house for 40 years their assessment is insanely low.

When I bought my present home, back in 2015, the property tax more than doubled - - it went up from $771/year to $1,701/year. I expected it and have no complaints since we get good value for our money. With new millages, by last year it was $1,822.

This year they decided to re-assess properties because it has been four years. That's the first time in twenty years (that I know about) that all the properties were re-assessed at once due to the passage of time, as is supposed to happen. My property tax is due in a month, so last night I tried to pay it online but they aren't ready for that yet. I have no idea how much my increase will be, since there are new millages too and they are still uploading the new assessments. I want to just pay it so it isn't hanging over my head!
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Old 11-20-2020, 11:35 AM   #15
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If the owner claims homestead, the assessment is capped at 3% or CPI, whichever is less. Up on sale, the property assessment will be based off FMV, and if the new owner claims homestead, future increases will be capped (there is also portability if an owner sells and buys within two years to transfer the accumulated reduction). The save-our-homes cap definitely makes me more comfortable with my budget as I approach FIRE.



In my townhouse community, the range is about 6x between long time residents (that bought after the collapse in 2008) and new buyers. Without save our homes, some of my neighbors could be priced out of their homes by the booming market if paying based off of current market values.



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Old 11-20-2020, 11:58 AM   #16
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Originally Posted by sengsational View Post
I'm not sure it's statewide, but my calculations for when I bought my aunt's house in Fort Lauderdale went awry because, as a non owner-occupier, I didn't get the homestead exemption. It was a charity move, and although it hit my cash flow harder than I planned, it wasn't a big deal. Then I got lucky in that the 55+ rule was overturned and the price shot up for the later sale. But the point was it's not always easy to figure your taxes by a casual look.
Bingo I noticed when we looked at snowbirds in Southen they always used the resident number for PT. In fact the tax rate for second homes is always a higher mill levy in UT.
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Old 11-20-2020, 12:13 PM   #17
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Originally Posted by wrigley View Post
My home in Duval County (Jacksonville) Florida is currently worth a little more than 3X what we paid for it.


Here are my last 11 years of property taxes starting with 2010 on the top.


$1,596.00
$1,661.86
$1,733.83
$1,861.09
$1,889.16
$1,888.35
$1,871.53
$1,888.20
$1,918.00
$1,948.44
$1,977.24


Mike
You must be a Florida resident with a homestead exemption which also caps how much they can increase taxes every year.
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Old 11-20-2020, 12:31 PM   #18
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Most likely the current owner is a resident and has benefitted for many years from the 3% cap and the $50,000 homestead exemption. I just looked at 2 neighbors, one is a resident and the other is a non-resident. The non-resident market, assessed and taxable values are all $205,000. The resident's values are $205,000, $157,867 and $107,867, respectively reflecting the $47,133 cumulative impact of the 3% cap et al and the $50,000 homestead exemption.

If you were to buy the property for $310,000 (there have been a couple recent sales for $305,000 and $315,000) and were a non-resident your tax would be based on $205,000 and if you homesteaded your property tax would be based on $155,000.

The $310,000 you paid doesn't factor into the market value directly, but indirectly as your purchase will be include in the comps used in determining the future market value for your and similar properties. The appraisers then reduce the value derived from the comps by 15-20% for "sales costs"... but really so values are uniformly low so they get less grievances on the assessed value.
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Old 11-20-2020, 01:40 PM   #19
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Thanks for the replies


Some more details about one of the properties.


Address:

1620N State Road 53, Madison, FL 32340
Asking price is $765,000 located in Madison County, Fl.

According to Realtor.com, 2019 taxes were $2,838 on a total assessment of $194,827
According to Zillow, 2019 taxes were $2,540 based on a tax valuation of $194,827

From the tax assessors web page:
The mil rate is 18.3786
They bought the land for $10 in 1995 and built the house in 1997.



Would the new taxable value be the sales price less the $50K exemption?
Example: Mil rate of 18.3786 times the sales price of $715K ($765K-50K) would give me a tax bill of $13,140.70.

Or would it be the Just market value of $596,688 (-$50K homestead) = $546,688 x mile rate of 18.3786 = $10,047.36?

In the above, Imagine down sizing and buying a house half the selling price of your old one only to have your new tax bill on the new house more than twice what it was on your old house?

This would demotivate me from wanting to ever sell if on a monthly budget.




Let me add that I don't think that $10K a year tax on a $765K house is unreasonable, especially as there is no income tax in Fl. This house is an example of some houses I've been looking at, it is not right for us as being too flamboyant and big. We like to have land for fresh air and quite, perhaps a farm of some type (pets, not food), for hobby, but not a large house.
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Old 11-21-2020, 12:19 AM   #20
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Yes, my understanding is that if you bought it and made it your homestead that your property tax would be based on the Just (Market) Value of $596,688 less the $50,000 homestead exemption.

I see the mil rate as 16.3786 on the TRIM notice... not 18.3786. You may also still qualify for the $34,284 agricultural exemption so there may be some potential savings there on county and other tax but not school tax.

Assuming that you would still qualify for the agricultural exemption and with the change in the mil rate I'm getting more around $8,600 a year rather than $10k... that's the $2,593 that the current owner pays plus the $365,249 Save Our Homes assessment reduction that would go away times the 16.3786 tax rate. YMMV. If you get serious about the property you could talk with the county as to what the taxes would be if you bought it and made it your homestead.

BTW, I had to truncate the address to 1620 N SR 53 to find it.

Keep in mind that they do offer significant discounts for early payment... my county offers a 4% discount if you pay by Dec 8, 2020 vs Mar 31, 2021... if Madison county offers similar terms that would drop it to about $8,250/year.
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