|
To print article, click Print on your browser's File menu. Go back Posted 7/13/2005 |
|||||||||||
|
|||||||||||
|
|||||||||||
|
Extra Taxes soar along with home prices Property tax collections have skyrocketed -- and they still havent caught up to the white-hot housing market. See how your state compares. By The Associated Press As home prices skyrocket, property taxes are also going up, especially in hot markets like Florida, California and the Northeast. "Young families simply can't afford to live here. It's very difficult for police officers, firefighters, teachers and nurses," said Lori Parrish, the property appraiser in Broward County, Fla., who has pushed for more property tax breaks. Teri Vasarhelyi and her husband thought they would be able to afford a bigger house with more land two years ago when they left San Francisco, the most expensive home market in the country. They figured they found a good deal in a two-bedroom house in the peaceful, leafy Coconut Grove area near Miami for $440,000 in March 2004. But the shock came when their first property tax bill came a few months later -- more than $9,200 a year, nearly double what they paid on their old home.
"That's an awful lot of money, on top of your mortgage, to find that cash," said Vasarhelyi, 35, who's taking time off from her advertising career to raise their baby. Many people are running into similar problems, a side effect of the real-estate boom. Trouble for homeowners on fixed incomes First-time home buyers are especially running into trouble as wages adjusted for inflation haven't kept pace with real estate prices, and elderly residents on fixed incomes who have lived in their homes for decades are also struggling to pay ever-increasing taxes. Related tax and housing commentary on MSN Money The national average annual property tax collection was $968 per person in 2002-2003, up 18% from $822 five years earlier, according to the latest figures available from the Tax Foundation, a research organization in Washington. The median home price nationwide rose to $170,000 in 2003 from $128,400 in 1998, according to the National Association of Realtors. (It hit $188,000 in the first quarter of 2005, the NAR said.) The most expensive states for property taxes were in the Northeast, with New Jersey topping out at $1,872 per person in 2002-2003. The cheapest state was Alabama at $329 per person.
While rising property taxes in theory should slow down the real-estate market, that hasn't happened for two key reasons: "The popular belief that real estate is the best investment and the American willingness to spend a remarkably high fraction of their disposable income on housing," said foundation spokesman Bill Ahern. States try to give some relief Governments are still sensitive to complaints from homeowners. At least 48 states have tried to give homeowners relief from rising property taxes, according to the National Conference of State Legislatures. The methods include tax freezes, restricting property taxes to a percentage of the home's market value and caps on how much a home's assessed value can increase. Many states are considering expanding property tax relief. But local governments are also wary of cutting back on what they collect -- they get more than 95% of all property taxes. Altogether, American businesses and homeowners paid $296.7 billion in property taxes in 2002-2003, up from $279.1 billion in 2001-2002, according to the latest data from the U.S. Census Bureau. Those numbers likely climbed even faster recently along with record-high home prices. Property taxes pay for everything from schools and roads to police and fire departments. While they usually are collected by local governments, states generally write the laws that govern them. "States are interested in keeping property taxes manageable at the same time they're balancing the delivery of public services demanded by citizens," said Bert Waisanen, fiscal analyst with the National Conference of State Legislatures. Property tax relief varies widely from state to state, and even within them. A 2002 report by the legislative conference said that states are walking a tightrope to ensure that tax burdens are fair. "(T)he relief provided to some may come at the expense of others," the report said. The legacy of California's tax revolt California was a pioneer in easing the burden of property taxes. In 1978, voters there passed Proposition 13, which capped the increase in a home's taxable value at 2% a year until it is sold. It also limited a homeowners property tax to 1% of market value. Many other states followed with similar breaks, even though California's recurring budget crisis has been partly blamed on the initiative. Forty-eight states also give homeowners a homestead exemption or credit, which allows them to deduct a certain amount from their home's taxable value. But those rules aren't enough to keep taxes level. It is also becoming more difficult for people to move because they usually lose out on property tax breaks when they do. For example, the previous owner of Vasarhelyi's house paid less because increases in assessed values are capped in Florida at a maximum of 3% a year. But once the house is sold, that limit is lifted. So what options do people have when the taxman comes calling? "The biggest thing that any individual homeowner can do is to make sure that they aren't overassessed. The errors that take place in assessing properties are rampant," American Homeowners Association president Richard J. Roll said. Some common errors are improper calculation of square footage and incorrect number of bathrooms or bedrooms, he said. Only 2% of homeowners have challenged their assessment, but many more should because about 70% of those who do receive a reduction, Roll said. "There are often tremendous disparities for no apparent reason," he said. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
MSN Money's editorial goal is to provide a forum for personal finance and investment ideas. Our articles, columns, message board posts and other features should not be construed as investment advice, nor does their appearance imply an endorsement by Microsoft of any specific security or trading strategy. An investor's best course of action must be based on individual circumstances.