There are many factors to plan for before starting your search for the perfect home, and property taxes are on the list of what you should think about. They are a fact of life for homeowners, but the rate you’ll pay is dependent upon where you live and how much the property is worth. Here, we share more about how property taxes are determined and what happens with the funds.
Property tax is the oldest tax levied in the United States. They are assessed by local governments, and the tax rate may be quite different by state and county. For example, the average property tax rate in Hawaii is just 0.271% of assessed home value, while New Jersey’s average is 2.442%. Colorado’s average property tax rate of 0.551% of assessed home value is below the national average of 1.080%. Boulder’s property tax rate sits just above our state’s average, at 0.585% of assessed home value. The property tax rate has a notable impact on the cost of homeownership: the owner of a $400,000 home in Hawaii will pay $1,080 in annual property taxes, while a resident in New Jersey will pay $9,760 for the same home value. A homeowner in Boulder County will pay approximately $2,340 in annual taxes on a property’s assessed value of $400,000.
Property tax rates vary widely due to the differences in spending by each municipality. Some of these differences can be attributed to average home values. When the average home value in an area is higher, the local government will benefit from increased revenue. Even the local economy can contribute to the tax rate: for example, Hawaii’s tax rate is low because this state’s economy is anchored by a thriving tourism industry. Colorado’s low property tax rate is partially attributed to the Gallagher Amendment, which caps the share of tax burdens on homeowners and places a higher rate on commercial property owners. Curious about the current property tax rate in your area? Visit this site to calculate property taxes by state, or reach out to your local tax assessor’s office.
If you’ve made the exciting decision to invest in property, you may be interested in learning where your tax dollars are going. Property taxes benefit your community and are primarily used to fund the “five S’s,” which include schools, safety, public spaces, streets, and sanitation. These essential services play a vital role in society, and property taxes ensure that your city meets these fundamental needs.
Although paying property taxes may seem like a burden, each mortgage payment you make contributes revenue that your city needs to fund schools, parks, infrastructure, and more.
By Michaela Phillips. Michaela is the Vice President of Mortgage Lending at Guaranteed Rate, Inc. Contact Michaela at 303.443.6292, e-mail [email protected] or visit michaelaphillips.com. NMLS: 312874.