Thinking of buying or renting near NYC? Consider the tax costs
10 per cent of your salary goes to property taxes
other
Imagine setting aside 10 percent of your salary every year towards paying property taxes on your home. Well, that is a reality for some homeowners in the tri-state area.
Homeowners in New York City’s affluent Westchester suburb pay on average $15,000 in annual property taxes, which is comparable to about 10 percent of the average adjusted gross income of $148,775, according to Bloomberg’s analysis of 2015-2016 IRS filings, the most recent available.
Manhattan, or New York county, is a close second, where homeowners there pay about $14,400 in annual real estate taxes. Yet, filers in the city make on average $60,000 more per year than their suburban neighbors, meaning that a smaller share of their income goes towards paying property taxes. Half of the homes in Manhattan were valued more than $1.3 million at the end of 2015.
Two more counties in New York, five in New Jersey and one in Connecticut round out the top ten highest counties for taxes in the tri-state area.
Potential homeowners must weigh the costs between renting and buying. In recent years, rising home values across the country have hindered some renters from purchasing. In fact, the renter rate rose five percentage points to 36 percent from 2006 to 2016, according to an early August report released by Zillow. Further, as home values rise, so do property taxes which are a function of the home’s assessed value, increasing the difficulties of purchasing a property.
For the time period this data was collected, homeowners could deduct their entire primary residence property tax bill. But this year, things are different, the tax changes that went into effect at the start of the year include a $10,000 cap on deductions for state and local income tax.
Homeowners who face annual property taxes above $10,000 may feel constrained in the coming years as long as the legislation remains in place and home values continue to rise. Local governments may face pressure to constrain future property tax bills too. On average, state and local governments collect $1,518 per capita in property taxes, but collections vary widely by state, according to the Tax Foundation. Property taxes are particularly high in the Northeast with each of the New England states ranked among the the highest in the country on a per capita basis.
Bloomberg looked at IRS data for counties with more than 50 individual income tax returns that contained real estate taxation information as of the 2015 filing season, and with at least 200 home-owning households according to the latest Census survey. More than 3,000 counties met the criteria to be evaluated.
To be sure, the IRS data only provides the average real estate taxes paid, which can be skewed particularly in counties where exorbitantly-valued homes dotted the upper spectrum of the housing markets.
While the New York City metropolitan area remains a desirable place to live, neighbors outside of the immediate megacity region aren’t so lucky. Bloomberg’s analysis of Census data on median real taxes payment relative to home value, both as of 2015 data, shows the burden of owning a roof over your head particularly troublesome in Western New York.
Copyright Bloomberg News
Copyright © 2018 Key Media Pty Ltd