- Property Taxes and Your Home’s Value: What You Should Know
Property Taxes and Your Home’s Value: What You Should Know
If you’re in the process of buying your first home, here’s something you may not have thought about yet: the cost of your house isn’t the only monthly payment you’ll be making for the next 30 years.
In addition to the interest on your mortgage loan, added HOA fees, and even the monthly maintenance costs (usually about 10 percent of your mortgage every year), there’s also the added cost of your property taxes to consider.
Most people set their housing budget based on the amount of money they can afford to spend on a mortgage every month, which is why you can’t wait until closing to ask “do your property taxes go up when you buy a house” or how to lower property taxes after the fact.
Before you underestimate the cost of property taxes, or forget about them altogether, here’s what you need to know about this element in the path to homeownership.
Do Your Taxes Go Up When You Buy a House?
While there are certain tax deductions to consider, property taxes can be extremely high depending on where you live, so it’s possible that your overall tax obligation could increase after you buy a new home.
More importantly, your property tax rate won’t be locked in over the course of your mortgage. In fact, it’s more likely than not that your property taxes will continue to increase over time, at least as long as the property value continues to rise.
How to Calculate Property Taxes
Every state has different property tax laws, and the specifics of how your property taxes are calculated can vary from country to county.
In most cases, states impose a limit on the assessed value of your property to a certain percentage. As an example, if your state imposed a 75 percent assessed value limit, a $300,000 home would be assessed at $225,000 for tax purposes.
Some values are determined as an overall average of the area rather than being based on your specific property, but many states limit the percentage by which your property taxes can increase each year (typically 2 percent).
How to Lower Property Taxes
When your property value increases, your property taxes rise with it. It’s counterproductive to hope for a decrease in your property value over the long term, but there are some efforts you can make to help keep the costs as low as possible.
1. Do Your Homework Ahead of Time
When it comes to property values, most of the details are available publicly. Not only can you easily determine how other homes in your neighborhood have been assessed, but property tax bills are also public information.
Before deciding if or how you want to proceed, compare your property valuation and tax cost to other homes or comps around you. If you seem to be overpaying compared to the median home price, you may need to take additional efforts to lower your property taxes.
2. Don’t Fight the Assessment
When you’re in the process of buying a new home, your best bet is to give the assessor as much access to your property as possible. This valuation will help determine the cost of your property taxes (at least initially) and a proper assessment should mean a fair and honest appraisal.
3. Pay for an Independent Appraisal
Of course, in some cases you may want to pay for your own independent appraisal. You can hire an independent appraiser at any time as a homeowner, and use those findings to adjust the cost of your property taxes.
4. Appeal the Case
Worst case scenario, if you’re convinced you’re still overpaying for your property taxes, you can appeal with your local state tax office. This isn’t guaranteed to lower your tax bill, so you’ll want to make sure you’ve done all the appropriate research – and maybe solicited expert opinions – before going down this road.
Navigating the World of Property Taxes
Like so much about becoming a homeowner, there’s no manual to help you navigate some of the finer points of buying and maintaining a home. Property taxes can be confusing, and more importantly, they can change from state to state and year to year.
The most important thing to remember about property taxes is that they’re tied to the value of your home, so when your property values go up, so do you property taxes. Still, if you think the valuations are unfair for any reason, you’re empowered to file an appeal with your local tax office to have the numbers reviewed.