Along with the red hot housing market's rise in home values, property taxes are zooming up too.
At a time when the soft economy isn't always generating sufficient operating funds for the local government's budget, property taxes are a godsend, often the local government's greatest source of revenue.
The U.S. Census Bureau reveals for the year ending 2004, property tax collections grew 24 percent nationwide. Sales taxes were only up 12 percent and income tax collections actually dropped by a percentage point.
But that's not good news for many individual home owners who, in some cases, have watched property taxes quadruple or even reach a point where they cost more than the monthly mortgage payment, according to the AARP's recent "The Big Squeeze" report on property tax increases.
"The taxes are driving people out of their homes," says James Dieterle, director of AARP's New Jersey office, which has been a leader in the state for property tax relief. "One resident whose house is paid for said her property taxes now are higher than her mortgage payments and taxes were combined," Dieterle said in the report.
Growing property taxes are particularly rough on older home owners whose income has plateaued or begun to fall.
Property taxes on residential real estate have been so lucrative for governments they are also moving to enact or increase transfer or conveyance taxes, essentially a sales tax on home sales and sometimes in addition to a sales tax on home sales.
In Santa Fe, NM the city council passed a resolution to ask state lawmakers to legislate cities' rights to levee a transfer tax, in some cases to help fund affordable housing in the city.
The Santa Fe Association of REALTORS bristled with opposition.
"If the goal is to get more people into housing adding a tax onto the cost of housing seems counter productive. Second, it's double taxation. Commissions on the sale of a home are already taxed as income," said Lee Brown government affairs coordinator for SFAR.
Hawaii wasn't so lucky. Effective July 1, a large share of Hawaiian home sellers began paying a higher conveyance tax on property transactions. The tax remains at ten cents per $100 for transactions under $600,000 dollars. But the tax doubles to 20 cents per $100 for conveyances exceeding $600,000 and goes to 30 cents per $100 dollars for homes costing more than $1 million.
"The saddest part of our new conveyance tax is that it was touted as taxing the rich, but the reality is that the tax increase applies to all sales over $600,000 which is below the median sales price in our state," said Jacqueline Parkinson, executive officer of the Kona (Hawaii) Board of Realtors.
Mac Lowfon, president of Hawaii Association of Realtors said the vast majority of home sellers will pay the new conveyance increase because home prices are so high on each of the islands. More will soon have the pay the higher rate. Depending on the island and city, home prices have risen from 25 to 50 percent in Hawaii this year alone.
"On Ohau the median price of a home last month was $600,000. In Kauai it was $665,000. On Maui last month it was $873,000. That means well over half the people on Maui will pay the higher rate," Lowfon said.
While transfer and conveyance type taxes are virtually impossible to avoid once law is enacted, property taxes do typically come with a system to challenge the assessment, which is what AARP advises home owners who believe they are being over taxed.
AARP says:
* Challenge your assessment. Many times assessments can be changed with persistence by homeowners. At the very least, you can find out what your neighbors' assessments are and see if yours is out of line. Be prepared for what could be an arduous process that includes an appeal of the first "no" decision.
* Apply for a property tax deferral, now offered by some states, that allows homeowners to postpone payment of some or all property taxes until they die or the home is sold.
* Find out if your state is one of the many that offer tax rebates or exemptions that are based on the homeowner's age and income.
* Consider petitioning for a referendum on property taxes or working to elect state and local officials who make tax reduction part of their agenda.
|
