Local governments rely heavily on property taxes to fund schools, roads, police departments, fire and emergency medical services, and other services associated with residency and property ownership. Your property tax bill, nealry always imposed by local governments, such as cities, counties, school districts, or municipalities—not by state or federal governments, is generally driven by two variables: (1) the value of your property as assessed by the taxing authority and (2) millage rates set by the authorities. Generally, you have the ability to appeal #1, however, you can’t do much about #2 except vote and pay close attention to your local elections.
Trend Post-2023
Due to the increase in home prices, property taxes have increased. Furthermore, to capture some of this value, states such as Michigan
Other Considerations
The rates and data provided below are for Owner-Occupied homes. Rates may be different for business-use property. Furthermore, there are other items to consider, including but not limited to:
- Taxable Value Increase: The taxable value of a property, on which taxes are based, maybe subject to an annual cap in your respective state. For example, in Michigan, this cap is set at the lesser of the inflation rate or 5%.
- “Uncapping”: When a property is sold or a major renovation occurs, the taxable value may be “uncapped,” which means it adjusts to align with the property’s market value, potentially resulting in a larger tax increase than the capped rate.
- Combined Effect For some homeowners consecutive increases coupled with uncapping, could lead to a greater property tax increase than you expected.
Conclusion
When purchasing a home, it’s crucial to look beyond the listing price and mortgage rate—property taxes can significantly affect your long-term equity. Even a modest annual property tax of $5,000 adds up to $150,000 over 30 years. These costs quietly chip away at your investment and can influence your financial planning more than you might expect.
Disclaimer: The information provided herein is intended solely for informational purposes and no person(s) or other third-party may rely upon it as financial, tax, or legal advice or use it for any other purposes. As a result, Royal Financial, and any affiliates, assume no responsibility whatsoever to readers, or any other persons for that matter, as a result of the information contained herein.