Death and Taxes

Benjamin Franklin said “in this world nothing is certain but death and taxes”. Will Rogers expounded on this topic and said “the only difference between death and taxes is that death doesn’t get worse every time Congress meets”.

It seems like taxes impact every aspect of our lives. We pay income taxes on what we earn, sales and excise taxes on what we buy, and property taxes on what we own. Because the state of Texas imposes no personal income tax on its citizens, property taxes are heavily relied upon to support local services like our school districts. In fact, according to the Tax Foundation, out of all 50 states, Texans pay the highest amount of property taxes on owner-occupied housing based on median real estate taxes as a percentage of median home value. Of course, the median home value is less in Texas than many states, so the ranking could be somewhat skewed. But nevertheless, property taxes are generally higher in Texas than in many other states.

Because of the heavy reliance on property taxes here in Texas, the amount of taxes levied on a residence is always a matter of concern for home buyers. And since property taxes can vary significantly among neighborhoods, its best for home buyers to understand the tax burden on each property of interest before making a home buying decision. Understanding the basics of how property taxes are levied is a good first step. It’s a fairly simple process. The amount of tax levied on a property is the product of the home’s assessed value less exemptions, times the tax rate for each taxing entity applicable to the property.

A recent random sampling of neighborhoods in Montgomery County revealed composite 2009 tax rates from $2.01 / per hundred dollars of valuation to $3.28. The $1.27 spread amounts to $2,997 of additional tax annually on the average priced home sold in Montgomery County over the last 12 months ($236,000). It should be noted that one of the largest differences in tax rates between neighborhoods is in those that belong to one of the municipal utility districts (MUD) as MUD tax rates vary significantly. It should also be pointed out that some of the areas with lower composite tax rates have offsetting costs such as annual homeowners association dues and installation and maintenance of a water well and/or septic system.

There are many factors to consider when searching for a new home. From a financial perspective, the most emphasis is typically placed on the upfront costs of the home. But it is also important to assess the ongoing costs of owning a home. And property taxes are a major component of the total yearly costs of home ownership. There are few things as devastating as a family finding out that their dream home is costing more than they can afford.

If you are in the market for a home, I strongly recommend using an experienced, local, full-time Realtor. They can help you gather the necessary information to make an informed decision. If you don't currently have a Realtor, I would be pleased to represent you. Give me a call at your convenience on 936-537-1656 or send me an email at Claudia@ClaudiaHohlt.com.