Friday, February 1, 2013

Property Tax

An interesting point came up when D hosted a couple of his team members who were up visiting from South Carolina and Florida. 

First off, they were disgusted with our weather.  The last time they came up, it was 8 C and that was enough to cause complaints.  This time, they didn't have words as they were so cold. 

At lunch, D's friend's (from Michigan) housing struggles came up during a conversation about housing and school districts.  The one lady from South Carolina who moved about 4 years ago piped up and said she didn't think 9K was a lot in property tax.  She paid much more...to the tune of 22K a year for a 160K house!!   

The other fellow, from Florida was a young guy who is considering buying his first house.  So far he hadn't come across such numbers yet in his search.  He was shocked at the amount as well.

In Canada, we pay taxes according to how much the house and land are valued.  It has nothing to do with school districts.  So you would never find a house worth 160K with a 22K property tax price tag.  You would have to own a house in the millions or be waterfront in a popular cottage area (same difference) to have those kind of taxes. 

If you don't want to send your kids to the school in your area, you can choose to apply to another school but it would be your responsibility to get them there.  It happened to me during my last year of high school.  My parents moved so I applied for "flexible boundary" and took public transit to get there.  Had I decided to go to the art school instead of a regular highschool, it would have been an even bigger commute.  Thank goodness we have options like that here. 

***Speaking of housing costs, I just got our bank's annual mortgage summary.  In 2012, D paid $23304 in principal and $1599 in interest.  No complaints there.***

6 comments:

  1. Property tax rates in the US vary not only from state to state but even county to county and town to town. But they are almost always based on the value of your property. That South Carolina story sounds a little sketchy though. Are you sure she had her facts straight?

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    1. D thought so too, so he verified if she really meant $2200/yr or whether 22K/yr included her mortgage costs. Same questions I asked him when he told me.

      The only thing I can think of is maybe she is paying for a special assessment? She said they had recently built 2 new primary schools and one high school in her district. (We wouldn't get charged extra for that in Canada)

      My first house back in '98 cost around 300K with a $2900/yr property tax where I only got municipal water.

      When my area was up for sewer improvements (we were on septic), the bill for the upgrade was going to be 27K per household and each of us was going to have to pay for getting the line from the street to our houses which I priced out at around 12K min. But in our case, the 27K costs were going to be spread over 8 yr worth of taxes. I moved before the construction came into effect.

      That's all I can think of. I'm assuming as a homeowner, you would know your numbers.

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  2. I can't help but think that number is not accurate. There are many published lists available of the highest property tax rates by county and by city. In the US, county property tax rates top out at less than 3%. There are a half dozen cities with rates up into the 4%'s, but these often replace the county rates, and they are often temporary rates to deal with a temporary crisis. Also, none of these high rates are in South Carolina. I have never heard of any US rate remotely approaching 13.75%.

    I know you would expect that people would know what they pay in property tax, but frankly, it's a lot easier to believe she was mistaken than that the rate was that high.

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    1. Thank you for providing more detail!

      Property tax is a touchy issue in Canada. Not sure why. You can find broad generalizations between provinces published but not specifically within province. And the body that is there to help "standardize" property values in my province is often known to be very off the mark. That's why we have taken steps to appeal our assessment this year.

      In general, I do tend to give people too much credit. What floors me is that she works in finance! If I was to bet, I would say the 22K/yr includes mortgage payements.

      Question for you: If I were to buy a house in the US that was a short sale or a foreclosure, would I be paying property tax based on the new lower selling price or the original "value" of the house? In other words, people who own houses that are "underwater", would they have been paying less and less property tax over the last few years as their values have dropped?

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    2. MW, this is not an area of expertise for me, but in general, I think the majority of property taxes in the U.S. are based on assessments and not sale price. Where I live, they assess the properties every year, and so even if the rate stays the same, our prop taxes go up and down based on the assessments. I know some jurisdictions only assess every few years instead of yearly, and I believe CA (if I recall correctly) only assesses when it's sold. I'm also pretty sure NYC has some wacky rules. So there are a lot of possibilities, but I think in general they are usually based on some kind of periodic assessment.

      I've known people who work in finance who were incredibly uninformed about loans or investments or whatever. Never underestimate people's ability to completely compartmentalize some niche subfield and never pay attention to anything else, even when it's related. :-)

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    3. I had no idea even assessments varied so much in the US. We are once every 4 years. I wish it was every 2 years as lots can happen with the world in 4. British Columbia, where our ski condo is, seems much more in tune with the market than my home province. Thanks again for the education.

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