SmartAsset set about finding where local property taxes are the most burdensome. It found what it was looking for in Paterson, N.J., a down-at-the-heels former industrial center that today has little to cheer about. Jersey itself came out on top for taxes as well.
Here's what SmartAsset found:
● New Jersey homeowners pay the most property taxes – There are seven cities on our list where property taxes account for over 30% of the cost of owning a home, on average. Five of these seven are cities in New Jersey. The average effective property tax in New Jersey is 2.19%, nearly double the national effective property tax rate of 1.19%. Topping the list is Paterson, New Jersey, where average annual housing costs run just under $26,000 per year. Of that, $8,600 goes to the local government. Elizabeth, New Jersey comes in right behind Paterson. In that city, we estimate the average annual costs of housing to be $28,260 and median annual property taxes to be $9,400.
● Alabama and Louisiana homeowners pay the least real estate taxes – Nine of the bottom 15 cities are in Alabama or Louisiana. In fact, all of the six cities where property taxes make up the smallest portion of annual housing costs are in one of these two states. In contrast to New Jersey homeowners, property taxes make up less than 7% of housing costs for homeowners in these states, on average. In Montgomery, Alabama, for example, median property taxes cost $508 per year, while average annual housing costs are $12,456. That means property taxes are equal to around 4% of housing costs. In Kenner, Louisiana, the city where property taxes hurt the least, property taxes make up just above 3% of annual housing costs, on average. Louisiana has the third-lowest average effective property tax rate in the nation at 0.46% while Alabama has an average effective property tax rate of 0.44%.
● A change to tax implications – In previous years, homeowners could deduct state and local property taxes from their income taxes if they decided to itemize. However, starting in tax year 2018, that deduction is now capped at $10,000 after the passing of the new tax law under President Trump. In total there are four cities - Newport Beach, California; Palo Alto, California; Mount Vernon, New York and New Rochelle, New York - where the median household pays more than $10,000 in property taxes. This means homeowners in these places will now be even harder hit by their property taxes. In Mount Vernon property taxes are worth 30% of annual housing costs, on average.
Methodology and Sources
In order to rank the places where property taxes have the biggest impact on housing costs, SmartAsset looked at data on 599 cities across two factors. Specifically, we looked at:
● Median property taxes paid. This is the median annual property taxes paid by homeowners with a mortgage.
● Median housing costs. This is the median annual housing costs for homeowners with a mortgage.
Data for both metrics comes from the Census Bureau’s 1-year American Community Survey.
In order to rank the cities, we divided the median property taxes paid by median housing costs. This resulting figure showed the percent of housing costs which went to property taxes. We then ranked the cities from highest to lowest based on that percentage.
For homebuyers who want to see how property taxes will impact their total housing costs, SmartAsset’s mortgage calculator provides a monthly breakdown of the various fixed costs associated with home ownership, including property tax.
