These States Have the Highest Property Taxes, but a Possible Loophole Offers Hope

volk65/iStock

Brace yourself! It’s time to file your taxes—and it’ll hurt more depending on where you live.

A new survey by WalletHub has determined that this year, same as last, the state of New Jersey has earned the dubious bragging rights of having the highest property tax rate in the nation. According to U.S. Census Bureau data, residents here pay a median of $7,601 in taxes per year on homes at the state’s median value of $316,400. Divide that tax payment by the home price ($7,601/$316,400), and you’ve got a tax rate of 2.4%. (Property taxes are determined by local government, such as city or county, rather than the state.)

That 2.4% rate might not seem so high, but it is when you compare that with the state with the lowest property taxes: Hawaii. In the land of luaus, homes are priced pretty high, at a median of $538,400, but residents here pay a median tax of just $1,459. That turns out to be a rate of 0.27%—nearly one-tenth of what Jersey folks cough up!

And as if the news weren’t already bad enough for the Garden State and others with high property taxes (Illinois and New Hampshire are next on the list), it gets worse once the new tax code kicks in next year.

In the past, property taxes were a separate tax deduction you could take in full. But starting in 2018, property taxes will be part of a lump deduction with state and local sales and income taxes—and capped at $10,000, even for those married filing jointly. Talk about a tight squeeze.

Think property taxes are just an afterthought when buying a home? On the contrary, they can prompt buyers to steer clear of certain areas entirely.

“I have shown buyers properties that they fell in love with, only to say a big fat no because the taxes were too high,” says real estate agent Denise Supplee at SparkRental.com, who has lived and shown homes in New Jersey. “So, property taxes do matter! And the new cap of $10,000 on property and other taxes will only make it more difficult for high-property-tax states.”

Property tax loophole in the works?

But all is not lost, Jersey folks: Local legislators are working hard to forge a loophole to offer some relief.

“New Jersey just passed a bill that will allow cities to create charitable endowments as a possible workaround,” says Supplee. “This would allow New Jersey homeowners to declare their property taxes as charitable donations. This bill was passed on Monday with a 28-9 vote. Of course, it will have to get through the doors of the state Assembly, and there are a few naysayers such as Treasury Secretary Steven Mnuchin, but if it passes, residents will be able to declare their property taxes as a charity write-off.”

And even if this doesn’t go down in New Jersey, similar efforts in other states might succeed.

“There are four other states considering the same ploy,” says Supplee. “Those are Nebraska, Virginia, Washington state, and California. It should be interesting to see how this plays out.”

Plus, it’s important to keep in mind that high taxes often mean better schools, infrastructure, and other amenities.

“I find that people love to complain about property taxes and always feel their taxes are too high,” says personal finance expert Michael Dinich, who fields questions from real estate clients about home buying in New Jersey. “Residents here may pay more in property taxes, but they also enjoy a high standard of living, some of the best schools in the nation, and more stable home prices.”

In other words, you may get what you pay for. In case you’re curious how your state stacks up, below is a full rundown of the states with the highest and lowest property taxes, along with the median amount paid in taxes and the tax rate.

States with the highest property taxes

1. New Jersey: $7,601 (2.4%)
2. Illinois: $4,058 (2.32%)
3. New Hampshire: $5,241 (2.19%)
4. Connecticut: $5,443 (2.02%)
5. Wisconsin: $3,257 (1.95%)
6. Texas: $2,654 (1.86%)
7. Nebraska: $2,506 (1.83%)
8. Vermont: $3,893 (1.78%)
9. Michigan: $2,185 (1.71%)
10. Rhode Island: $3,929 (1.65%)

States with the lowest property taxes

1. Hawaii: $1,459 (0.27%)
2. Alabama: $550 (0.43%)
3. Louisiana: $750 (0.51%)
4. Delaware: $1,274 (0.55%)
5. District of Columbia: $2,811 (0.56%)
6. Colorado: $1,516 (0.57%)
7. South Carolina: $821 (0.57%)
8. West Virginia: $629 (0.59%)
9. Wyoming: $1,223 (0.61%)
10. Arkansas: $721 (0.63%)

The post These States Have the Highest Property Taxes, but a Possible Loophole Offers Hope appeared first on Real Estate News & Insights | realtor.com®.

from DIYS http://ift.tt/2t54EEM