Buying a home is exciting, but it’s also a huge commitment. And one of the responsibilities of homeownership is paying real estate taxes. How much you will end up paying can vary significantly depending on a variety of factors — from how much your home is worth to where you live.
To illustrate just how much variance there is in the amount of property taxes people pay, LendingTree looked at the median amount of real estate taxes paid in each of the nation’s 50 largest metropolitan areas. In doing so, the online lending marketplace found that homeowners in some metros can expect to pay thousands of dollars more per year than homeowners in other parts of the country.
“Different county and state governments assess property value in different ways, which can contribute to why tax amounts vary so significantly across the country,” says Tendayi Kapfidze, chief economist at LendingTree, explaining that individual areas also have different tax rates and offer different tax breaks to homeowners, which can also affect how much people are paying in real estate taxes.
Revenue generated from property taxes is generally used to fund local projects and services such as fire departments, law enforcement, local public recreation, education, street maintenance and sanitation.
The median real estate tax amount in Las Vegas — where homeowners pay the least in property taxes — is about $7,700 cheaper than in New York, where real estate taxes are highest.
Las Vegas and Birmingham, Alabama are the only two metros where median real estate taxes amount to less than $1,000 a year. The median property tax amount paid by homeowners is $696 in Las Vegas and $892 in Birmingham.
Besides New York, homeowners pay the most in property taxes in expensive cities like San Jose, California and San Francisco. The median amount paid is $8,400 in New York, $7,051 in San Jose and $6,181 in San Francisco.
“Despite these regional differences, how much homes are selling for in a given area is usually the most important factor in determining an individual home’s value, regardless of where you live,” says Kapfidze. “As a result, places where home prices are higher like New York and San Francisco are more likely to pay higher real estate taxes than other parts of the country, even adjusting for variations in tax rate or appraisal practices.”
Real estate taxes are an average of $641 lower on homes without mortgages. Because property taxes are based in large part on home value and homes without mortgages tend to be worth less than those with mortgages, it makes sense why this is the case. Nonetheless, real estate taxes on homes without a mortgage can still be pricey, especially in areas like Salt Lake City and Seattle.
“I think it’s fair to say that knowing how much you’ll pay in property taxes is about as important as knowing how much your mortgage payment will be,” says Kapfidze. “After all, both are things you have to pay in order to keep your home, and both can be significant expenses.”
Many lenders will roll your property taxes into your monthly mortgage payments, and then use that money to pay your tax bill for you when it’s due to the government.
“As a result, while you should always double check to be sure you’re paying what you owe in taxes, you might only need to keep track of one payment a month,” explains Kapfidze. “If you’ve paid off your mortgage, then you definitely have to keep a closer eye on property taxes as you’ll likely no longer be able to count on your lender to keep track of them for you.”
Here’s the LendingTree report, including the methodology, and full list of cities where real estate taxes are highest and lowest.
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