Author Topic: Shopping for First Home - Property Tax Help  (Read 1176 times)

BigRed

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Shopping for First Home - Property Tax Help
« on: March 21, 2017, 08:08:03 AM »
We're shopping for our first home in NJ, where the property taxes are very high.  That is not the problem, the problem is that even within the same town, we're looking at 3 houses listed at about the same price that have property tax bills (and assessments) that differ by almost 50%.  So, I'm struggling to figure out how to incorporate a property tax estimate into our budget.  Should I simply use the published municipal effective tax rate and assume that the assessed value will ultimately line up with the market value we pay for the house?  Or should I assume the current assessed value is more reflective of the future property taxes.


Krolik

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Re: Shopping for First Home - Property Tax Help
« Reply #1 on: March 21, 2017, 09:03:16 AM »
I don't have experience with NJ but saw the same thing when we were buying our home last year in South Florida.
Every time the house is sold the county will reassess its value and calculate the property tax according to its current market value. Our county website offers a nice tool where you enter the current value of the property and it gives you the tax rate. Check out your county website and something similar may be available. Anyway, for budget purposes I would go with the assessments for properties sold within last 6 months in your price range. That will give you a good idea how much your property tax will be.

BigRed

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Re: Shopping for First Home - Property Tax Help
« Reply #2 on: March 21, 2017, 09:15:00 AM »
Thank you.  That is very helpful.  The county tax office does not have a tool, but does have a spreadsheet with effective tax rates by municipality.  Price * Effective Value is something I can type into a calculator (or enter in my budget spreadsheet).

I'll try going to the county records site and see if I can search for purchase dates in the last year.

Dave1442397

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Re: Shopping for First Home - Property Tax Help
« Reply #3 on: March 21, 2017, 11:14:22 AM »
Our township (NJ) did a reassessment of everyone's property a few years ago. That didn't affect us much (-1.4%), but I've seen other towns where it caused people's taxes to jump 20-30% in a year.

Also, look at the tax history. The chart below shows our tax history since 2005, and you can see how much it went up. The reassessment actually lowered our taxes by 1.4%, which I'd forgotten. The assessed value of the house is not the market value - market value is probably $100k over the assessed value. I can't see us staying in NJ once we retire :)

YEAR   PROPERTY TAXES   CHANGE   TAX ASSESSMENT   CHANGE
2015   $10,445   +2.4%   $295,400   --
2014   $10,197   -1.4%   $295,400   +67.7%
2012   $10,344   +7.8%   $176,100   --
2011   $9,597   -5.5%   $176,100   --
2010   $10,154   +2.1%   $176,100   --
2009   $9,948   +4.5%   $176,100   --
2008   $9,523   +2.9%   $176,100   --
2007   $9,254   +8.9%   $176,100   --
2006   $8,495   +9.4%   $176,100   --
2005   $7,762   --           $176,100   --

jtraggie99

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Re: Shopping for First Home - Property Tax Help
« Reply #4 on: March 23, 2017, 01:24:54 PM »
Saw this thread and thought I would add to it a little.  I'm not familiar with NJ property tax laws, but I am familiar with Texas and Washington State.  I work in software and used to work for a company that built software for county appraisal and tax offices for both states.  As was pointed out, appraisers will typically reassess a value when it is sold.  Many states have caps on how much they can increase a property value assessment from year to year.  If a property sales, then this does not apply and they can reassess to what they believe is the full, market value.    Of course, even this varies from state to state.  In some states the sales are reported to the assessor, and some they are not (meaning they do not know what you paid for it unless you or someone else voluntarily tells them).  This is good for the home owners in markets where property values are going up.  Secondly, assessed value does not equal taxable value.  Many states have exemptions (such as homestead) that are applied to the assessed value, thereby reducing the taxable value.  Different home owners might qualify for different exemptions, thereby resulting in different taxable values than they then pay taxes on.

Your best bet is to assume your purchase price will eventually be your assessed value.  Then figure out what exemptions you qualify for, what taxing entities you pay taxes to, what their rates are, and calculate it all from there.  Either your local county should have this info or that state or both. 
« Last Edit: March 23, 2017, 03:11:14 PM by jtraggie99 »

BigRed

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Re: Shopping for First Home - Property Tax Help
« Reply #5 on: March 23, 2017, 02:25:38 PM »
Thanks.  That is my current modeling assumption.

I've added in the additional principle that if a reasonable mistake in estimating my property tax puts the comfort level of our budget in jeopardy, then the budget was too tight.