This post will provide a detailed look into property taxes by state. The differences in property taxes by state from the highest (Illinois at 2.32%) to the lowest (Hawaii 0.28%) is astounding. Although, these are average property tax rates by state because many counties have slightly different property tax rates within a state.
Therefore, just because a state has cheaper home prices doesn't mean you're getting a better deal long term. States rely on property tax collection to pay for public utility works, schools, and more. There is seldom a free lunch when it comes to takes. If there are no state income taxes, you can bet your bottom dollar property taxes and sales taxes will be higher.
During the pandemic, a lot of people relocated to Texas from California to pay no state income taxes and buy cheaper homes. However, the property tax rate in Texas is 80% higher than the property tax rate in California. Texas was also ranked in a CNBC poll as the worst state to live and work in 2023.
Where you live in America can really help or hurt your finances. In a time when working from home is more feasible, many more people are trying to geoarbitrage to make their income go farther. However, if you are to buy a property in a different state, you must take into consideration the property tax rate given it is forever.
The City Loves Your Property Taxes
I used to despise my property taxes because San Francisco would raise them even when property prices were declining during the financial crisis. It was/and still is up to property owners to fill out a complicated form, find comparable homes that have dropped in price within a certain radius, make sure the comparable sales fit within a certain timeframe, and pay a $60 fee to do so with no guarantee you'll win!
If you didn't spend time contesting your property taxes, the city would gleefully raise them despite the obvious declines. The city counts on meek or ignorant people to fill their coffers and pay themselves handsome salaries. Downgrade your property’s statistics online to make it look less valuable than it really is.
It's just like how members of Congress continued to get paid even when they shut down the government or close businesses during a global pandemic. Can you imagine losing your job in the recession and having to pay higher property taxes while knowing your neighbor sold his house for 20% less than the city's assessment?
Always Fight Your Property Taxes If You Think They Are Unfair
I fought my property taxes in 2009, 2010, 2011, and 2012 and won for a particular property I bought in the beginning of 2005. I had to fight since the value of my stock and real estate holdings were getting hit and I no longer had a job in 2012.
Since 2013, I've let the city tax me back to my normal purchase price plus a ~2% a year catch up increase because the economy has thankfully recovered. I don't mind paying my fair share so long as it's just.
After paying over $500,000 in property taxes since 2003, I've finally accepted the reality it's up to those of us who saved like crazy and took the risk of owning property to pay. It is our responsibility to pay for our community's infrastructure, education, public transportation, service men and women, and other public works. We must pay for those who cannot or will not.
What I've also realized is that after much debate, my fellow renters absolutely believe they are paying their fair share of property taxes, even if they aren't cutting a separate check to the city twice a year.
With this thought in mind, I now believe it's logical behavior for renters to keep on voting for increased government spending. After all, renters also want better and are willing to pay for it through higher rents. If they didn't, they wouldn't be fair since we all benefit by services from the government.
Property Taxes By State
Below is a map that shows the property taxes by state. The darker the shade of purple, the higher the property tax rate.
Although my home state of California (0.81%) property taxes feels high due to high property prices, it's not the highest property tax state. The San Francisco property tax rate is 1.24%.
The highest property tax states are: New Jersey (2.38%), Illinois (2.32%),Connecticut (1.98%), Wisconsin (1.96%), Texas (1.9%), Nebraska (1.84%), Michigan (1.78%),Rhode Island (1.67%), New York (1.64%), Ohio (1.55%), and Pennsylvania (1.54%) are much higher.
Surprisingly, one of the lowest property tax states is Hawaii, my favorite state in America at only 0.28%.
My family and I plan to relocate to Hawaii in 2031 when our son enters high school. If we had the money, we could literally buy a property worth $10 million and pay less than our current property tax. Nuts!
Why Higher Property Taxes Are Good
Although I hate paying property taxes, I want to look on the positive side of things. With the government getting bigger under President Biden and the global pandemic ruining state budgets, it is an inevitability that property taxes are going higher.
Here are five reasons why higher property taxes are good. I've used my hometown of San Francisco as an example.
1) We want our public servants to do a great job for us.
Roughly 40% of San Francisco's 40,000 +employees make over $100,000. If our BART train janitors can make $271,000 and our elevator technicians can make $284,000, this should attract some of the most dedicated people to our city to ensure we have the cleanest bathrooms and the most functioning elevators around.
Imagine having to take a dump and seeing a disgusting toilet that hasn't been cleaned in a week. Imagine being 80+ years old with a bad knee and having to walk up two flights of stairs. By paying our government employees top wages, we should get top service.
2) We want our public servants to be able to afford homes and take care of their families.
The median price for a home in San Francisco is around $1.8 million. To comfortably afford such a house requires a total household income of at least $250,000, if not closer to $350,000. A society is strong when every citizen has the opportunity to own his or her own home and plant roots. They'll pay property taxes, help take care of their neighborhood and grow a strong sense of community. Having a stable place to grow up is great for our children.
3) We want better schools, roads and public transportation.
The better our public schools, libraries, roads and general infrastructure, the more attractive our cities will be. The more attractive our cities are, the more people will want to come and stay. The more people come and stay, the higher rents and property prices go.
The higher rents and property prices go, the wealthier property owners become and the more the city earns in taxes to theoretically help all citizens. More job opportunities are created for renters as well so they can one day buy if they want to.
Related: Your Homeowners Insurance Policy Needs To Be Updated
4) We want to empower renters to help make a difference.
It's sometimes hard being a renter in a booming economy because you might not be able to fully participate in the upside as a price taker. Imagine wanting to buy a place that costs $700,000 one year, but costs $800,000 the next year. Meanwhile, your salary only increases by 5% from $100,000 to $105,000.
Feeling like you're getting left behind is a terrible feeling. The good thing is that we all have the equal right to vote for legislation to help improve our environment. When legislation passes that requires additional spending, property taxes go up and so do rents. Higher rents actively allow renters to help participate in the very legislation they support.
5) We create more harmony between landlords and renters.
When rents are rising in an economic recovery, there's an inevitable friction between landlords and tenants. Some tenants might view landlords as greedy for raising their rent, even though they understand the law of demand and supply.
Some landlords get frustrated for being called greedy when their property taxes, maintenance costs, construction costs, insurance costs, plumbing costs, electrician costs and handyman costs all go up.
If more tenants knew how much it actually costs to own property, including the cost of a mortgage, there might be less friction and more love. When there is more love, there is more happiness.
My Property Tax Bill
Below is a snapshot of one of my property tax bills in 2020. It's the property I mentioned in the beginning of this post. The net taxable value is $1,825,109 and the total annual property tax I have to pay is $21,873.72.
I don't know about you, but paying ~$21,873.72 a year for the past 11 years, and each year for the rest of my ownership life is a lot of money for an unemployed writer.
I never enjoy raising rent on my tenants, which is why I hardly ever do. Only when there is turnover will I try and raise the rent to whatever the market can bear.
When I have raised the rent in the past, it's never been by more than 2.5%. The rent increase is always due to a rise in some type of cost and not due to my desire to make more money, e.g. increases in HOA, insurance, etc.
Property Tax: Easy Target To Raise By The Government
The San Francisco Bay Area passed Measure RR, a $3.5 billion Bay Area Rapid Transit maintenance bill to be paid for by property owners. It required at least a 70% margin of victory and it passed because a landslide 81.1% of San Francisco's voters supported the measure. What this means is that most of the supporters of the bill are renters since ~65% of San Franciscans are renters.
The passage of Measure RR is good news for the Bay Area since we need well running trains to ensure the people of our booming economy can get to work as safely, cheaply, and efficiently as possible. This is great for renters and homeowners. Compared to the public transportation system in NYC, London and Taipei, the Bay Area's train system is terrible.
A Bay Area homeowner will now see his or her property taxes go up at an average tax rate of $8.98 per $100,000 of assessed value in 2017 with a peak of $17.49 per $100,000 in 2036. In other words, my property tax bill will now be higher by $180 – $332/year on top of the $21,873.72 a year I already pay. Let's just call it $22,000 a year.
Although it feels bad to pay even more property taxes, here's the silver lining. Because renters understand that higher property taxes means higher rents, landlords now have a much easier reason to raise rents so that we can all share in the responsibility of taking care of our public works.
The E-mail To Send To Renters
Based on my research, the number one reason why so many landlords do not raise rents each year is because it's a difficult and awkward conversation to have. People do not like to make other people feel bad. Confrontation is uncomfortable.
Everybody understands that due to inflation, the cost of ownership goes up at least 1-2% a year. And if a landlord does not raise rent by the same 1-2% a year, the landlord is losing. But despite landlords knowing renters understand this logic, landlords still don't raise rents every year. This is B economic inefficiency that must cease.
If you are a landlord who is faced with higher property taxes due to new legislation voted by the people, you can now send them the below e-mail or letter to raise the rent for the good of the community. Simply swap out the legislation, amount of spending, purpose for spending, amount of rent and timeframe to fit your situation.
Dear Tenant,
I hope all is well with you. Due to the passage of Measure RR, a $3.5B bill to maintain our public train system, the city is raising property taxes by roughly $XXX a year over the next 20 years. As a result, your rent will increase by $XXX a month starting on June 1, 2017 for the next 20 years as well.
Thank you for supporting our public transportation system and great city. Not only does your rent and my property taxes help decrease congestion on our roads, we help create new libraries for our children, keep our teachers employed and help maintain our beautiful parks.
Respectfully Yours,
Your Landlord
Related: Income And Net Worth Required To Buy A Home At All Price Points
Everybody Pitches In With Higher Property Taxes
It's important to make your tenant realize the rent increase isn't just because you want more money to help pay for rising costs. You must also highlight the value proposition of what the new rent provides. People want to know their money is going towards something meaningful.
Landlords should no longer be frustrated with ever increasing property taxes anymore if they consistently raise rents whenever a new bill that raises property taxes is passed. Renters should no longer be frustrated with rising rents either when they vote for more government spending.
to make raising the rent easier, you should always include a schedule of rent increase in the lease agreement when first signing. This way, there are no surprises and the tenants can plan ahead.
Everything is rational in the end. It's up to each of us to stamp out inefficiencies and embrace the goodness of ever increasing property taxes. Together, we will all pitch in to support our community.
Just know that even if you pay off your mortgage, you will always owe property taxes. Therefore, knowing the property taxes by state and relocating to states with lower property taxes may be a wise move in retirement.
Recommendations To Make And Save Money
If you don’t want to constantly pay massive property taxes, don't have the downpayment to buy property, or don’t want to tie up your liquidity in physical real estate, take a look at Fundrise, one of the largest real estate crowdsourcing companies today.
You can invest in deals around the country for as little as $10. Fundrise primarily invests in Sunbelt residential and industrial real estate deals that are cheaper and offer higher yields. Fundrise began in 2012 and now manages over $3.2 billion for over 350,000 investors.
Another great private real estate investing platform is Crowdstreet. Crowdstreet offers accredited investors individual deals run by sponsors that have been pre-vetted for strong track records. Many of their deals are in 18-hour cities where there is potentially greater upside due to higher growth rates. You can build your own select real estate portfolio with Crowdstreet.
I've personally invested $954,000 in private real estate since 2016 to diversify my holdings, take advantage of demographic shifts toward lower-cost areas of the country, and earn more passive income. We're in a multi-decade trend of relocating to the Sunbelt region thanks to technology.
Both platforms are sponsors of Financial Samurai and Financial Samurai is an investor in Fundrise funds.
Looking for a home insurance policy?
Check out PolicyGenius, the one stop marketplace for home insurance and other insurance needs. Instead of apply to individual insurance carriers one-by-one, apply for a home insurance policy on PolicyGenius and get multiple insurance offers. Then choose the best one that's right for you.
I've met the founders at PolicyGenius multiple times and I truly believe they have the best insurance platform today.
Related: Unemployment Benefits By State
Property tax rates by state is a Financial Samurai original. All rights reserved. Join 60,000+ others and sign up for my free weekly newsletter. This way, you'll never miss a thing.
The author has to be thinking “how do I complain without complaining. My taxes will increase $7500 this year with appraisal increase and new school bond that passed. Now considering moving where I’m being priced out. $13k a year is just too much for taxes in an average house in an average town.
True, but also I wanted to present the data so readers can make more informed choices on where to buy property, when.
Government in the US has proven to be a very poor allocator of capital. Why would I be ok with paying higher taxes if the money does not get funneled effectively or efficiently
No,
Americans shouldn’t want to pay higher property taxes.
Look around, its obvious that the citizenry’s tax dollars are not going back into the up keep of our nation’s crumbling rotten infrastructure.
The property owning public shouldn’t have to bear the brunt of paying for a purposefully neglected rotting infrastructure while those we elect suck the tits of Liberty dry at the expense of it.
Has America become, so goddamned addicted to the dumbed-down demagoguery spewing from the ass of two party political con that it cannot see this shit?
We have let public servitude become nothing more than wannabe royalty and we have pimped ourselves into a serfhood whored out by the finest stupidity and laws of ignorance that greed can buy.
Public service isn’t supposed to make one rich or the rich richer
Our nation’s rotting from the inside out because society’s tax dollars aren’t being spent in the right ways, or for the right reasons.
The Democratic and Republican Party, are the very embodiment of corruption pimping the deluded illusion of false choice.
This article got to be a joke…no way this guy can be serious..(higher rent = happier renters?) -lmao—
The article is trying to make renters and other people think thrice before voting on politicians and laws that raise property taxes on homeowners. In the end, it all just comes around.
Austin, Texas, is considering a 20%+ rise in property taxes (during a recession) in order to fund transit, which we need. The City Council is currently granting many up-zones, so that developers can build 13 units per acre rather than 8 units per acre (current code). Why shouldn’t they ask the developers to contribute to the transit in exchange for the right to increase capacity? The City and the developer can split the increased profit resulting from the up-zone. Many of the City Council members simply bow down to developers without negotiating community benefits. I want transit, too, but not solely on the backs of homeowners, who are already struggling to keep their homes (Texas has very high property tax but no income tax). Our lot values also rise sharply bc of growth (good jobs).
You don’t get it do you? Those bureaucrats are in bed with the developers, they get kickbacks, are actually related to the owners in someway, etc.
The government is all about sucking the peons dry. At some point the taxable base cannot sustain it. More and more homeless people, more inflation, more and more lunatics at the helm… That is government. There is no accountability, just like they like it. They all point the finger at each other or everyone else. Hell, even if they get caught doing something you would get 10 years in prison for, they just resign, collect a bonus, and move on to destroying something else.
Government is the problem. When you give people power with no accountability they will use that power to destroy you. America is just in the free fall, just wait for the splat. Government will never fix itself. The very people causing the problems going to change? They will just move to another country after all is said and done. In fact, as things get worse their schemes to extract more wealth will grow causing the collapse to be larger and sooner. When they make enough and things are bad enough they will flee like the rats they are.
I live in Germany – we do not have any taxes on property. If you own it, you just pay your bills – and modern houses have very low expenses for heating or none – and we also do not have any airconditions as the walls are usually thick and well insulated and the windows are good. So what is left is water and electricity.
When you reach pension age, this is good as pensions are really bad now.
However our income tax goes to 42% and super-rich 45% – and companies also pay more taxes then in the USA.
I would say the best thing would be tax free property if you live in it – but tax additional properties or tax building land if people do not plan to build and take it away from others – or tax people that keep on buying and selling property for profit.
The ideal tax system would be:
– people who do not own anything (yet) should pay less taxes
– people who do own a lot should pay more taxes on the income => this way it is easier to become wealthy when you start with nothing and people who already are wealthy become more wealthy slower which is good as for every super wealthy person a lot of others will become poor
– people who dont work and just live on revenue from rent or stocks should pay more taxes then people going to work for the same money
I liked that you said that one reason for the raising of property tax is that it helps pay for the public works system to ensure that your community is functioning properly. I would imagine that this would be crucial to any community in order to provide beauty, safety, and efficiency. I would be sure to consider hiring a property tax service to help me understand that necessity more fully and to help me pay my taxes properly.
Except it doesn’t, it is a lie. Texas has one of the highest rates yet it’s infrastructure is falling a part. Government is the problem. It’s just a bunch of maniacal morons trying extract as much money as they can while they do as little as possible to actually do their jobs(assuming they even were competent to do them in the first place).
If I get paid $271K a year just to assure toilets doesn’t get clocked, sign me up! I chuckled that riding a train is gonna be cheap, only if you are considered poor with government assistance. And the writer appears to be well off given his past occupations and savings with a $1.8M house, but yet worried about his property tax as an unemployed writer?
Our taxes are sending ppl out of the state. In Illinois state pensions go up 3% per year. This includes firemen, police, teachers, park district workers, librarians… this is the retired ppl. They make more being retired than working, plus we pay into future pensions. It’s insane. The state will file bankruptcy. The increases won’t go away, it’s in their union contracts.
Higher property taxes are not good period! Only a very rich person would say that. Get outta here with that bull!
yes it is true.
You really think higher wages will attract better higher quality people? You stuff won’t get picked up any faster than anyone else not living in the nanny state. Human nature bud. Get realistic.
This article sounds like it’s written to try and manipulate people into thinking we should pay higher property taxes! The problem is, we are! The problem is, people would be darn shocked how much is so wasted by people we trust in government. If they managed and spent only what was necessary and budget wisely, the taxes should actually be going down because we are overpaying into the system. That’s why this article is absurd, trying to brain wash us into thinking we should just let government rob us for their wasteful hands.
It’s actually the opposite. Property taxes are an ongoing tax on many people who do not use equal resources.
I totally agree. If I went to a grocery store and stole a pack of gum, I’d be put in jail for shoplifting. It’s a fact that the government is stealing from us.
Only a few speak out and no one is listening. Don’t give up. Eventually the “ignorants” will wake up and by then it’s too late!
This year, I’m embracing my high property taxes by accelerating the payment of my 2017 property taxes (~$9600 @ roughly 2.2% rate) into 2016 for the tax deduction. Most years, this would do me no good, as for the past several years I’ve been in AMT – and state/local taxes aren’t deductible under AMT. But this year, I got myself laid (off – in Sam’s vernacular) and negotiated a nice severance package (with some help from Sam’s severance book – you’re welcome for the advertising, Sam), which unfortunately pushes me past AMT and into the top federal regular tax bracket. Accelerating my property tax payment into 2016 at my overall federal/state combined tax rate of over 47% will save me over $4500. Next year, my income should be much, much lower and I may just take the standard deduction.
I didn’t realize how low my area’s property taxes are, in part, because I’m a renter. I know our tenant-friendly laws are very hard on landlords, but at least they aren’t getting it on either end. I used to live in a state with incredibly high property taxes and incredibly tenant friendly laws and I worked for a landlord and it was the worst. So much ignorance, but so little willing to learn.
I’m another Illinois resident. Believe me if it wasn’t for family and my job in this state I’d get out or jump across the border to a more homeowner friendly state.
I understand the theory behind more property taxes = more value. I don’t believe it though. Pay a livable wage for a good worker, sure, but at a certain point paying a janitor $240,000 a year per your San Francisco reference becomes a case of diminishing returns.
Even then, in Illinois you can be sure our tax dollars aren’t going to actual janitors and workers; most of it goes to bureaucracies. In Illinois we have over 7,000 local taxing bodies, and each of them with their own managers and administrative staff who need to be paid for presiding over the one or two guys who actually do the work. Not to mention each of these units probably wants a referendum for a fancy new building or something along those lines.
And then when they retire (at least in our state) and are guaranteed six figure pension incomes for life with cost of living raises each year, it’s no small wonder why our per household debt sits at $45,000, and why more wealthy incomes earners are leaving our state as opposed to entering. Long-term it’s hard to see a way out that doesn’t involve Detroit bankruptcy on a state level.
The problem is that the average private sector worker is increasingly stressed, has a less stable employment pathway, and whose wages are increasingly under pressure from a hyper competitive / convergent global labor market, particularly in tech and finance which are well represented as a share of the workforce here in NorCal. However, at the same time govt workers remain relatively unstressed, with not only a stable employment pathway – regardless of actual job performance and business outcomes mind you – and built in wage increases based on seniority in many cases and even supplemented by overtime – good luck getting overtime at a VC-backed tech startup – but also benefit from a massive pension payout at the end of all this. So yes I do mind paying more in taxes since I need to save for my children and since we all know that social security will soon be means tested – gee I am so glad I scrimped and saved – and shortly thereafter entirely defunct. Well, at least until Trump arrived. :)
Fixing these programs will be a long, drawn out process that I hope can be reined in. Social program spending in this country has spiraled out of control, and for a lot of people they can make about as much money collecting gov’t money sitting on their butt watching TV all day long. That needs to stop. I had a neighbor that did this. They didn’t get married, had some kids, and the mother worked. The father of course took care of the kids. They had a huge TV and would come home from the grocery store with steak and lobster once a week. It was unreal.
Is it possible to get LESS property tax, LESS rent, and LESS government spending? Can we do that? I’d like that.
Sincerely,
ARB–Angry Retail Banker
Hi Sam,
You probably already know about this but there’s a site called rentometer.com that gives you rent comps for other properties in your area. It’s pretty easy to use and can be used to justify to your tenant why your rent is what it is. In terms of property taxes, yes it’s good for public workers because unlike private companies that have the flexibility to provide bonuses and raises to their employees based on profits, the government really only relies on tax revenue.
I was confused reading this article. I had to double check that it wasn’t written by a guest writer. In a different article, I thought you didn’t like paying federal taxes and would even consider earning less to pay less taxes. This article you then say you are okay with paying higher property taxes. Why are you okay with paying higher property taxes but not higher federal?
Did you read the conclusion and who actually pays for the increase in property taxes? Sometimes you have to accept that which you cannot change and figure out a solution. I tried for years to convince people to stop voting for more government spending since it’s so wasteful and inefficient. I’ve tried to convince renters that higher property taxes just leads to higher rents.
But I feel that I’m the one who was overthinking things b/c I’m coming to realize renters don’t mind higher rents since they understand their actions lead to higher rents. Hence, it’s up to landlords to oblige and raise rents to stamp out economic waste.
I almost have to agree with the other commentor that you must have been joking with this blog post — its so out or character. I’m sure I’m not the only one that’s been rubbed the wrong way. Bottom line: you’re not stamping out economic waste; you’re enabling and promoting it. The economic waste is coming from the top down, i.e. the parasitical career politicians that are economic ignoramuses but excel at exploiting ignorance and rationalizations.
Look, if you’ve now given up on convincing people that government is wasteful and inefficient, don’t go “soft in the head” and try to rationalize that you’re actually getting something above average (Lake Wobegone, remember) with your “outrageous expenses” by paying more in property taxes each year than the average American’s yearly SS check. If — as you say — technology has improved our quality of life everywhere, you sure as hell do not need to live in SF to get it, nor continue to enable a corrupt culture of overpaying busywork government employees.
I also agree with the other commentor: you can’t rape the willing. So, if all the stupid-rich people in SF don’t perceive the problem with paying six figure salaries to busywork public servants via confiscatory taxes due to self-reinforcing “outrageous expenses” that is of the stupid-rich’s own doing, well… they will get what they deserve. It’s a Ponzi Scheme like any other.
What is your solution for political waste then? I’ve tried to fight, and I did win for four years in a row. But when income tax continues to get increased by the state and property tax continues to get increased, there’s really nothing one can do except for move out of the state which I’m not willing yet because I don’t want to sell all my properties. I’ve got tenants in all of them, and it still cost about 6.5% all in to sell a property in San Francisco.
We can complain all we want about ever rising property taxes and income taxes, or we can figure out some solutions like I have done by sharing the property tax increases with my renters.
Besides, who’s to say that $271,000 for a janitor is enough? Why shouldnt the janitor make $350,000 year, or $500,000 a year like other people in the private sector. The only way he can get there is if we continue to raise rents and property taxes to help pay higher wages for our public servants.
I live your advice usually but I think you are way off-base here.
I can think of a lot of reasons why you wouldn’t pay a janitor $250k+. At a certain point he’s not going to remove any more dirt from the floor or provide you with prompter service.
And if a private sector janitor makes about $30k or so depending on where they live, why would you spend almost 10x that amount on one working for the city? I get paying someone a livable wage but you have got to be kidding.
I think it is because the private janitor only serves a private entity, whereas a public janitor service everybody. Everybody is at least 10 times more then who the private janitor serves.
We can argue until the cows come home how much a public service janitor should make. Given he has been making over $200,000 a year for three years in a row, the people have spoken and his income is absolutely acceptable by the government and by the people who pay a salary, otherwise he wouldn’t make such an income.
And now, there is hope for private janitors who want to make more, they can look to work for the government to make a hell of a lot more.
The key is to pass on your property taxes to the people who voted for more government spending. Then, you will no longer feel annoyed or mad because the cost increase is going directly to those who want it.
That janitor earned a high income because he worked tons and tons of overtime, probably double his normal work hours.
The article is incredibly flawed. So Flood I believe it should be retracted. If everyone made a lot more money all you would have is more inflation which means the prices of everything would adjust upwards and you’d be no better off. If the elevator repair man made $270,000 to be little reason to go to law school or to be a doctor.
Humans are flawed. Feel free to write an argument against my five points.
Less people are becoming lawyers and doctors in favor of occupations that require less education and quicker achievement. Just Google it. People are realizing there are MANY ways to make good money.
What’s your background?
I tell people if they want affordable housing then stop passing levy and tax increases because it just raises rents.
Lanrdlords that don’t raise rents and actively keep rents in line with market can be flagged in an IRSaudit. Underpricing your rentals is a red flag with irs showing you aren’t managing them as an investment. Trust me, they go thru all your rent rolls and that is why quicken added a module asking to verify/prove that your rents are inline with market rents to avoid high risk of audit.
Also the cost of replacing carpets and wear and tear costs are increasing so not keeping your rents increase is decreasing your net returns.
What are the some of the reasons why the IRS would want to go after landlords who charge below market rent?
They will say that you arent running the rentals as investments and will disallow the deductions. (I meant turbotax not quicken above)…just google irs audit for below market rents. If you show steady increases then tenants are used to is and irs see u are actively manage them. I just tell tenants that my costs (insurance, taxes, labor costs) and overall rental market had increased so rent have to go up. Its much easier to raise rents 3-5% a year than jack them up 10%+ in one year. Big increases is what gives landlords problems and causes tenant advocates to get more tenant laws passed. We juat had one passed locally.
Problem with all these these tenant laws is it causes more landlords to take inventory off the market for rent…..it is what is happening in Portland OR . Out of state investors jacked up rents huge in short time and now trying to pass all kinds of laws.
“I tell people if they want affordable housing then stop passing levy and tax increases because it just raises rents.”
I totally agree with you Brian…but you’d be amazed at how many people out there think they are somehow beating taxes by renting. People on this site all get it as people on this site tend to be much more financially savvy than the average person, but a lot of people are clueless when they cut a check to a landlord part of that check is going to pay the exact same property taxes that would be paid if the landlord lived there as a primary resident. If Sam sent that sample letter to a tenants, I’d suspect a lot of them would immediately just think their landlord is a cheap jerk bleeding them dry just coming up with excuses to raise rent for no reason.
Its just a death spiral after a while. People complain about high cost of living and vote for more government services thinking it will make things easier for them…only taxes go up more, which increases their cost of living.
Unless you literally want to plan your entire life around benefiting from government services, there is no point in living in a high tax area for most people short of being stuck at a job or biting the bullet because you have lots of family in the area.
“Unless you literally want to plan your entire life around benefiting from government services, there is no point in living in a high tax area for most people short of being stuck at a job or biting the bullet because you have lots of family in the area.”
Pretty true, although it is hard to change your habits and move away from friends and family the older you get. CA has already gotten $350,000 in property taxes alone from me. In away, I want to get some benefits now! And for about two years, I felt I was winning b/c I was making a median income and had time to enjoy the public works.
But if you are a landlord getting stuck with a higher bill, it is your duty to spread the cost to those who stuck the bill to you. In fact, it is reasonable to believe you should give the entire cost of the bill to those who voted to raise your bill.
I love the email template you provided and congrats on winning for four years in a row!!! Being in my early 20s from Wisconsin and not owning property it is good to know that I am #5 on the list!
I learned something new today.
Not sure paying taxes is the best way to help with all the things you mentioned. For instance, the government can get out of my kid’s schools. Let’s not mistake taxes for charity. I would agree with you if this article was about charity but I’m not too happy about paying more in taxes because I know that much of the funds are NOT going to good public works projects but rather to inefficient welfare programs or other government boondoggles.
I guess I just don’t have as much faith in the system as you do!!!
Exactly. I live in CT…#4 on the list. We get double slammed because we have relatively high property values as well. The only thing we really have to show for it compared to other states is a more generous welfare system and a more broke government employee pension system.
I’d love to buy a house on a few acres with a multi car garage, a viper, and a new rice rocket…but I’m not going to do it here because compared to my 1 car and my small condo its going to increase my taxes about 10,000 dollars a year.
I’m just going hold off a couple more years until I’m eligible for a transfer in my company, then I can move down south or out west where taxes are much cheaper, I can get much more house/land for my money, make the same wages, and buy all the nice stuff I want without getting killed in property taxes.
I’m not embracing higher property taxes, I’m avoiding them. At the end of the day the state/local government here just simply doesn’t provide anything for me that I wouldn’t get from any other state/local government. The benefits of higher property taxes are only seen by select individuals…sure a subsidized rail system for example might be nice if you use it often…but its only nice for those who use it because those who don’t use it are essentially paying for nothing. Acting like we should all embrace higher taxes even though it seems most of the time a lot of us get zero benefit from it is just silly. I’d rather the price to hop on a train simply go up a bit than my property taxes go up so someone else can get a cheaper train ride.
I think its supremely hypocritical that you title an article “Why we should all embrace higher property taxes” while not only in this article, but in many of your other articles, you talk about strategies to minimize your tax liability and have your tax burden reduced.
Don’t get me wrong I’m not blaming you for doing everything you legally can to lower your tax burden, I do the same, but why preach the opposite of what you practice?
If you read the reasons and the solutions, I don’t think it is hypocritical at all.
I fought very hard for very long to educate people that more inefficient government spending leads to more waste, and more cost to all taxpayers eventually.
Figuring out a way to amicably pass on the property tax increase that your renter voted for is a great solution. Everybody wins when we stamp out economic waist and inefficiencies.
In my other tax post on trying to legally minimize tax liability, I offer solutions as well. Always focus on the solution and try to read in between the lines.
“Why we should all embrace higher property taxes”
“Figuring out a way to amicably pass on the property tax increase”
Replace any reference to taxes with teddy bear and you can see how your stance here makes absolutely no sense.
“Why we should all embrace teddy bears”
“Figuring out a way to amicably pass on the teddy bear”
You aren’t embracing something if you are passing it off on to someone else!
Look you mentioned a public transit system in your sample. Well what if your tenants prefer to walk, bike, use uber, or have their own car? Why would you think they’ll gladly embrace higher taxes to support a system they don’t even use? Sometimes…higher taxes just encourage existing residents and businesses to move and provide potential incoming residents or new businesses with incentive to go to other towns. If the local bus company was looking for donations to keep ticket prices down I wouldn’t donate a dime to them when they don’t even run a route that goes near my house or my work…why should I embrace the local government raising my property taxes while subsidizing them?
I get the concept that paying a little extra in taxes for things that benefit everyone aren’t bad…but beyond the basic services like road maintenance, k-12 schools, police, firefighters, etc that actually does benefit all of us that are available everywhere, what does the government spend property tax revenue on that benefits everyone? Besides the transportation example above, what if you love to travel and they raise your taxes to build/maintain a park across town that you never go to. Should you embrace higher taxes that take money away from something you enjoy spending it on and reroute it to something you’ll never use? What is the benefit of that vs maybe just charging a 2 dollar entrance fee so those that use it can fund it instead and keeping your taxes low?
I don’t even ride the BART train b/c I walk, Uber, drive, or take the bus and I’m still paying.
Bottom line: We must ALL pay for ever increasing government spending until we gain a majority and decide enough is enough. We cannot let those who vote for increased gov’t spending to not pay their fair share.
California is a blue state. Taxes will always go up, and therefore, so will rents.
The taxes in our Central New York university town of about 30,000 are insane as well – about 2.8%.
For those looking to purchase property in a high property tax state: One strategy we used when we purchased our current home was to arrange to pay the sellers’ real estate fees at closing in exchange for a corresponding reduction in the purchase price. So, instead of paying the seller $550,000 for the property (from which they would turn around and pay 5-6% to the real estate agents), we wrote the contract to pay $525,000 for the property, plus $25,000 cash towards fees at closing. The recorded sale price (on which the assessed value and, hence, property taxes are based) was $525,000 instead of $550,000, saving us about $700 per year.
It’s not much, but with two kids to put through college, every dollar counts!
That’s a great tip KC! Not much, but will help more and more the longer you hold the property.
The best advice I have for keeping property taxes low is to buy a stalefish fixer. Instead of buying my property for $1.9M buy a fixer for $1.23m and put in a couple hundred grand. Having a $470,000 lower assessed value is worth $5,000 a year into perpetuity here in SF, and sounds like it’s worth $14,000+ where you live a year!
Hopefully property price appreciate has more than made up for your high taxes?
Not yet — we only purchased 2.5 years ago — but we’re in for the long haul! (We also re-fied this summer for 2.625%, so lots of reasons to stay put and appreciate.)
We live in California, but pay significantly more than the 0.8% average. Our property taxes are almost 2% as we have a special 20 year bond for the school district that we have to pay for, which essentially doubles our 1% tax rate to 2%.
Since we have our property taxes impounded and included in our mortgage payment, I forget about them…but when you add them up over the years, this is another significant chunk of change.
Luckily my wife is diligent about appealing valuation increases that lead to increases to our property taxes. And during the downturn she even fought and won reductions in the valuation of our investment condo…that saved us at least a few thousand dollars over the last 7-8 years.
You may want to consider INVESTING in the 20-year muni bond.
I know I plan to invest in the Measure RR BART $3.5B bond next year to recoup some of my money. If they can charge a high coupon, then all the better.
Never being a landlord myself, I’m all for property taxes to help improve my community… to a certain extend. What would my threshold be? I’m not 100% sure on that one. I’m fortunate to keep those tax values relatively low where I live.
That map of property taxes isn’t accurate. For example, here in the Denver Metro area hoses built in the past 10 years or so are all showing property tax bills in excess of 1.2%. And that’s in addition to the 9.25% sales tax and a 4.63% state income tax and whatever you’d pay for federal income tax. And add to that home prices have over doubled in many areas over the past few years.
We can’t afford to buy anything here unless it’s in a terrible area, so we’re visiting a few cities over Xmas and MLK breaks to scope out potential areas to move to. Oh, and our neighbors have been absolutely horrible at every place we have lived in this area. So many things we don’t like about living here that I won’t list them out here. Most of the state is just beautiful though, and we will miss that the most. The people, not so much.
Just out of curiosity, what’s wrong with the people?
It’s the effective property tax rate per state. In SF, I pay 1.17% even though the map says ~0.8% for CA.
That’s a lower tax rate than most places built in the past 10-15 years in the Denver area. Crazy to think SF has lower taxes than boonies suburbia here.
I’m not from here, so I’m not going to list all the things I don’t like about the people here, but I will say that I grew up in the SE where people are taught manners and how to behave, and that’s something that’s seriously lacking here. We share walls, and in the 6 years we’ve lived here we have never had a neighbor that wasn’t a selfish jerk. Upscale suburbia, not a bad area.