Rising property taxes can be a major burden on homeowners. When should I stop paying them?
When my husband and I bought our home about 12 years ago, we knew there might be a day when our property taxes would equal or exceed our mortgage payment. And of course, that day came pretty quickly.
We live in New Jersey, which has the dubious distinction of having the highest property taxes in the country. And because we bought a new build home, we were faced with a pretty large tax bill from the start.
But over the years our property taxes have increased dramatically, so much so that since we moved in, they have increased by $ 8,000. Next year they are expected to increase further, with home values rising across the board.
Over the past decade and change, my husband and I have considered moving to escape our high property taxes. If you are now planning to do the same, here’s what you need to know.
Is your property tax increase temporary?
Property taxes are calculated by taking a home’s estimated value (which is effectively its market value) and multiplying it by its local tax rate. Local tax rates vary from city to city and can change from year to year, as do home valuations. It is more common for home valuations to fluctuate significantly than the tax rates themselves.
Right now, home values are on the rise in the United States, so many homeowners are seeing their property tax bills go up. If this has happened to you, you might be inclined to pack your bags and move to a place where property taxes aren’t as important. But before you do that, you might want to sit still for a year or two and wait for things to end, especially if you’re otherwise happy with where you live.
Even if you move to a part of the country with lower property taxes, you will likely be paying a lot more now than you normally would because of increasing home values. But if you wait a few years, house prices may start to drop, and your property tax bill may go down.
Another thing to keep in mind is that even though your property taxes have increased, if you live in a location with relatively low house prices, it could help reverse those increases. If you move elsewhere, you could end up with a lower property tax bill, but you could also have to pay more for your home itself, thus wiping out those savings.
Now, if you live in a part of the country where property taxes are always high (like me), that’s another story. In that case, moving could be a smart move if you’re tired of spending a small fortune on taxes. But if you envision a more sudden and temporary tax hike, you might want to wait.
Make the right call
As tempting as it is to abandon the state of New Jersey and move to a place with more reasonable property taxes, my husband and I have our reasons for staying, at least for now. But if you’re not particularly fond of your area and have seen a continuous increase in property taxes, it may be time for a change.
Remember, however, that even if you do manage to find an area where house prices and property taxes are cheaper, you might end up sacrificing other things in the process, like proximity to family, friends, your job, and the local amenities you love. Before you let your frustrations with rising property taxes spur you on to relocate, you might want to take a look at your budget and see if there is a way to make it more manageable.