Home Ownership and Taxes

[tspforretirement]

Hello All!


Starting with a simple loan like a car we know that most people realize that if you cannot buy the car outright you have to finance it. Therefore you must pay whoever loaned you the money the principle and interest of the loan (which usually includes that one-time state tax). Then, to legally drive you have to have car insurance. Usually there are two separate payments, to the finance company and to the insurance company.

In the case of homeownership, generally, the mortgage payment is paying for everything at once. It is paying for the principle (P), interest (I), taxes (T) and insurance (I), i.e., “PITI”.

Example.

You take out a home loan for $100,000 for 30 years, with a fixed interest of say, 6%.

This means your “PI” (principle and interest) will be about $599.55 per month.

Now, I’ll skip to the second “I” (insurance), and to make everything a round number, the insurance company will cover you for 150.45 a month.

This total for the “PII” is now $750 a month.

Now the important part, “T” (taxes) and the most volatile part of the calculation (IMHO) are that the home is based upon the appraised value by an official city/state government agency. Therefore, when you bought your home it was appraised at $100,000 and the current tax rate was 3.0% then you would owe $3000.00 in taxes for that year. These taxes are taken out as part of the mortgage (divided by 12), therefore, $250.

Now your mortgage is $1000 [$599.55 (P & I) + $250 (T) + $150.45 (I)] per month.

BUT!

This was just the first year. What if the next year, housing was booming and the appraisal rates went up so your house is now worth $140,000, and because of the booming businesses the local government had to raise tax rate so now your house is assessed at 3.0% tax rate. You are thinking, “WOW, my home has appreciated so much – yummy-money!!” Here is your new mortgage calculation:

Principle (P) and Interest (I): $599.55 (Fixed rate – does not change)
Insurance (I): Can change – But this is not a discussion on insurance – Assumes a generous 10% inflation, so $165.50 per month
Taxes (T): $4200 ($140,000 x 3.0%) per year or $350 per month.

Now you are in the second year of new homeownership and your mortgage payment is $1115.05 per month.

All homeowners and potential homeowners should know what they are getting into. If you want to get a general idea of the homeowner’s taxes in your (or future) area you need to contact the local/state government. Most will provide the information for a nominal fee. Some provide it for free.

I provide the following links:

Maryland’s Property Tax Assessment:
http://sdatcert3.resiusa.org/rp_rewrite/ (http://sdatcert3.resiusa.org/rp_rewrite/)

Texas’ Property Tax Assessments:
http://www.texastax.com/ (http://www.texastax.com/)

Minnesota’s Property Tax Information/Assessments:
http://www.taxes.state.mn.us/ (http://www.taxes.state.mn.us/)

Now, this brings me back to the original purpose of this thread.

To help others help themselves.

Along with the above posted links the following is the direct link for Bexar County Appraisal District in Texas: http://www.bcad.org/ (http://www.bcad.org/)

By law, personal property ownership has to be publicly available. If you go to your county courthouse, local library, and pay a small search fee you can get the same information. Many states and local governments are now offering the information freely online.

If I’m allowed, then the purpose of this thread is for everyone to post the freely available taxable information on homeownership.

If you have an official link that does not require a fee, please let everyone know.

NOTE: Please do your own research, and I don’t mean by the internet. A lot of information is provided via other means. A simple phone call or a walk-in into your local library/county/city clerk works great! (Lately, I’m been told to go to “www….”) J

Hooah!

[Birchtree]

Don't forget you have a $25,000 homestead exemption and all taxes are deductable. Take out a home equity line of credit and pay off other nondeductable interest charges - the home equity line of credit is variable - the interest is deductable and interest rates are dropping again. When you sell you have a $1.2M exemption against capital gains. Just don't buy more house than you really need or you'll be stuck and never be able to buy equities - where the serious money is made.

[tspforretirement]

Don't forget you have a $25,000 homestead exemption and all taxes are deductable. Take out a home equity line of credit and pay off other nondeductable interest charges - the home equity line of credit is variable - the interest is deductable and interest rates are dropping again. When you sell you have a $1.2M exemption against capital gains. Just don't buy more house than you really need or you'll be stuck and never be able to buy equities - where the serious money is made.


Hi Birchtree,

I fully understand taxing advantage of all tax breaks. To include any local taxing agency breaks, veterans breaks, state, and even federal. I was trying to keep it simple. :)

There are many "breaks", but I would say the majority of new homeowners (and quite a few others) do not realize that they qualify for "something", but they will not get it unless they apply. Most likely apply in writing too.

Good points Birchtree, and if anyone has more of these tax relieving tips, please post. Also, please mention what state you are talking about, and only if necessary the city/county. They are NOT all the same.



Hooah!

[Spaf]

tspforretirement,

Looking back, I'm glad I visited our accountant prior to retirement. Granted we all have different financial and medical conditions. I was advised for IRS purposes to keep a short term minimum mortgage for itemization. The medical bills can really get up there: doctors, referrals, lab-work, prescriptionS, etc.

Spaf

[GGal]

Off topic a little bit.....the last two times the county revalued all the property, I appealed, and won.

This year they went up on my taxes by $650 a year.....I appealed, and the result was only a $50 increase in my taxes.

It pays to appeal.

GGAL

[Frixxxx]

Off topic a little bit.....the last two times the county revalued all the property, I appealed, and won.

This year they went up on my taxes by $650 a year.....I appealed, and the result was only a $50 increase in my taxes.

It pays to appeal.

GGAL
No appeals in CA. You pay what you owe. However the last time I looked, my taxes were based on 40% of my value. They even offer you an exemption from the county when you buy. $7000 for renovations or something like that.

[Bullishreturn]

Two things about property taxes in Michigan:

1. in 1994, we changed the way tax increased are done. Taxes are based on 50% of home value, but now your taxes can only go up something like 4% or the rate of inflation, whichever is LESS. So those who hold on to houses a long time have lower tax growth, and therefore lower taxes than others. Helps senior citizens, and those holding on. Value is reset when you sell a house to the new value.

2. Appeals of values to our local tax authorities don't work here. 99% of the time, the local appeal board turns you down, and makes to take it to a second level appeal. It's just the way it works. At the second level, your rate of approvals runs only about 10% of the time . So few people win they pretty much discourage appeals that way.

That said- home ownership is well worth the investment. I hope to have mine paid off in 8 more years (had a 30, then refinanced into a 15, and now am adding an extra 100 bucks each payment which will knock two years off the payments. )

The dream is to be payment free before retirement time.

[tspforretirement]

Hello All,

Two more web-links for Country Appraisal Districts in Texas:

Bell County: http://www.bellcad.org/ (http://www.bellcad.org/)

Coryell County: http://www.coryellcad.org/ (http://www.coryellcad.org/)

Those in the US Army know that Bell and Coryell Counties house Fort Hood.

Just found this link for MANY CADs in the state of Texas: http://www.taad.org/cad_web_links.html (http://www.taad.org/cad_web_links.html)

Hooah!

[nnuut]

Two things about property taxes in Michigan:

1. in 1994, we changed the way tax increased are done. Taxes are based on 50% of home value, but now your taxes can only go up something like 4% or the rate of inflation, whichever is LESS. So those who hold on to houses a long time have lower tax growth, and therefore lower taxes than others. Helps senior citizens, and those holding on. Value is reset when you sell a house to the new value.

2. Appeals of values to our local tax authorities don't work here. 99% of the time, the local appeal board turns you down, and makes to take it to a second level appeal. It's just the way it works. At the second level, your rate of approvals runs only about 10% of the time . So few people win they pretty much discourage appeals that way.

That said- home ownership is well worth the investment. I hope to have mine paid off in 8 more years (had a 30, then refinanced into a 15, and now am adding an extra 100 bucks each payment which will knock two years off the payments. )

The dream is to be payment free before retirement time.
Have 3 more payments on my home here in Georgia, paid off in 12 years, I can't wait to get the raise!!!:D2250

[tspforretirement]

tspforretirement,

Looking back, I'm glad I visited our accountant prior to retirement. Granted we all have different financial and medical conditions. I was advised for IRS purposes to keep a short term minimum mortgage for itemization. The medical bills can really get up there: doctors, referrals, lab-work, prescriptionS, etc.

Spaf


Hello Spaf,

I would agree but with one qualifier – Standard Deduction can be hard to beat.

To itemize taxpayers must surpass the "Standard Deduction", and one of the biggest areas that can be itemized is the interest and taxes paid on a primary home. What I've found is that this deduction is the biggest factor in being able to get over the "Standard Deduction" so that taxpayers can start to throw in other "eligibles".

But, if a home is so close to actually being paid off, would that not be a better "investment" strategy, especially if the plan is to sell.

The biggest problem I have with using medical expenses is that it is difficult to exceed the 7.5% of your AGI (adjusted gross income). Since only this amount can truly be added into your itemization. I guess this would a good time to use an example.

If your AGI were $50,000, then 7.5% of this would be: $3750.

So, if you had paid up to $3750 in IRS acceptable medical payments, it would amount to be $0.00 added to the itemization total.

But, if the total payments amounted to $4000 for that tax year, then $250 can be used in itemization, and then this can be added to the taxes and interest paid into the home mortgage.

And this $250 does not exceed the 2006 “Standard Deduction” for single taxpayers ($5,150), head of household taxpayers ($7,550), married taxpayers filing joint ($10,300), and married filing separate ($5,150).

As I was typing this and re-reading what I was typing, I came to the realization that.... Yes - maintaining a home mortgage does have the tax advantages. Then again owning the "deed" to your home has it's advantages, too. Perhaps, one day I'll see such a deed. :)



For those who like to do their own research I highly recommend IRS publication 17 and the applicable supporting publications, and in this case, that would be Forms and Instruction for Schedule A/B to the 1040.

All IRS publications, schedules, and instructions can be found at the IRS website at http://www.irs.gov (http://www.irs.gov/).

Regardless of anything that I may say, or you may read, if you are in doubt always seek the advice of a CPA that KNOWS their taxes.


Hooah!

[tspforretirement]

Off topic a little bit.....the last two times the county revalued all the property, I appealed, and won.

This year they went up on my taxes by $650 a year.....I appealed, and the result was only a $50 increase in my taxes.

It pays to appeal.

GGAL


Hi GGAL,

I did the same for the upcoming 2008 tax year.

History:

Bought a new house (built from the ground up) in 2006.

The 2007 appraisal initially did not show an improvement to the land, but it did catch up before the tax year was over. No problem, it was expected.

But, during the 2007 tax year, “SOMEBODY”, goes out and reassess tax value of property. Well, I received my new value. WOW! Great stuff, if I was a house-flipper! I'm not.

The new assessed value would have increased my mortgage payment (escrow for taxes) by another $150 per month.

Protest went in via snail-mail. Within the week I received a phone call from the local appraisal district to discuss my protest. I've found that not many do this, but the individual who was the “SOMEBODY” who did the appraisal was the one who called me to discuss my protest before it went to a formal hearing.

Guess what? No formal hearing, and my 2008 rates will be same as 2007. Good Stuff!

I'm pretty sure this won't work for 2009.

It doesn't hurt to try, and I highly recommend doing it if you have just cause. (Maybe, even if do not.)




Hooah!

[tspforretirement]

Have 3 more payments on my home here in Georgia, paid off in 12 years, I can't wait to get the raise!!!:D2250


Hi nnut,

I wish I were at that stage, but after rolling into another home, that'll be a few decades (again).

But, just thinking about it is great.

I guess the closest I can look at paying off a substantial debt is the car loan or how about the student loan (yes, I got 'em that old, and another one coming up).

Whew!

Hooah!

[tspforretirement]

Two things about property taxes in Michigan:

1. in 1994, we changed the way tax increased are done. Taxes are based on 50% of home value, but now your taxes can only go up something like 4% or the rate of inflation, whichever is LESS. So those who hold on to houses a long time have lower tax growth, and therefore lower taxes than others. Helps senior citizens, and those holding on. Value is reset when you sell a house to the new value.

2. Appeals of values to our local tax authorities don't work here. 99% of the time, the local appeal board turns you down, and makes to take it to a second level appeal. It's just the way it works. At the second level, your rate of approvals runs only about 10% of the time . So few people win they pretty much discourage appeals that way.

That said- home ownership is well worth the investment. I hope to have mine paid off in 8 more years (had a 30, then refinanced into a 15, and now am adding an extra 100 bucks each payment which will knock two years off the payments. )

The dream is to be payment free before retirement time.




Hi James, I like your last sentence. Alot!

I'm not going to make it there in my "first" retirement. Hopefully, my next.

We'll see.

Hooah!

[nnuut]

tspforretirement, Some like to keep a large debt just for the tax deduction, that works for some, but not for me. I refinanced the remainder of my house debt 5 years ago with a Home Equity loan (fixed) at 4.25%. This dropped my interest down to a level that I've had to claim the standard deduction sense then, but I saved over 20K in interest by paying it off early!! I'll be much happier in January!!:D:D:D:laugh:
Norman

[tspforretirement]

Don't forget you have a $25,000 homestead exemption and all taxes are deductable. Take out a home equity line of credit and pay off other nondeductable interest charges - the home equity line of credit is variable - the interest is deductable and interest rates are dropping again. When you sell you have a $1.2M exemption against capital gains. Just don't buy more house than you really need or you'll be stuck and never be able to buy equities - where the serious money is made.


Hello Birchtree,

I've found something that may have some intrinsic value for Texas residents and it includes the following exemptions: "Homestead", "Disable Homestead", "Homestead Tax Ceiling", "65 and Older", "Disabled Veteran", and etc.

The Tax Exemptions for the State of Texas are found here:

http://www.window.state.tx.us/taxinfo/proptax/exmptns.html


Very good stuff and if Texas residents don't take advantage of them, then, it's probably because of the lack of knowledge.


Hooah!

[tspforretirement]

If I'm not mistaken, most of the interest on an amortized mortgage is paid off early in the life of the mortgage. As the loan matures, larger portions of the monthly payment go towards paying down the principal. This means that in the later years of the mortgage you are basically paying back the principal with little interest, which is equivalent to a low-interest loan. Other than the mental reward of being mortgage-free, why would you want to pay off such a low-interest loan early? Why not keep the mature mortgage (i.e. low-interest loan) and simply invest your excess monies in other investments that will provide a greater return than in paying off a low-interest loan? Where is the flaw in this argument?


Hi *******,

First I have to ask are you a DnD enthusiast (reference your nick)? :)


Back to what you brought up. And if I read you correctly, then it is what is the benefit of paying a home loan off early?

My opinion is that it depends. I'll use an example of a homeowner who is paying $1000.00 in mortgage a month for 30 years.

Some are perfectly happy in paying their payment throughout the life of the loan.

Some would like to pay an additional amount, so that their pay off is less than the 30 years. Maybe it's timing to coincide with their retirement date (example).

Then you have some that will refinance into a better rate and therefore a lower overall mortgage payment.

At this stage, I offer, that most individuals who do this are composed of two people. "Have To" and "Good Deal".

The "Have To" does it, to meet their budgets (which of course is based upon their income and lifestyle). The "Good Deal" people realize that not only can they decrease their mortgage, but, in-turn, allows more disposable income that can be sent into investments (or to make more bills :().

Then, there are many other variations of why individuals "massage" their home loans....so many I equate it with playing the stock market.

Who knows, but it depends....Finally to answer your question...I do not have one.

(NOTE: There are so many PROs and CONs for both sides and it is and will be decided upon the individual/individuals who are involved. I'd like to note that, in my IMHO, the first-time home owner are always the most emotional.)

HOOAH!

[tspforretirement]

Hello All,

Another link for California, Los Angeles County:

http://lacountypropertytax.com/portal/default.aspx

Checkout the 2007 roll values. WHEW!


Hooah!

[wv-girl]

Repeat of the post in CD thread. Put it in the wrong place.

Is anyone, beside me, getting gouged by the insurance companies for home owners insurance? I realize that with the natural disasters the US has had in the past few years, the costs to ins companies has hit the max, but when they say that the costs for rebuilding your home, (should anything happen) has risen to the tune of approx. an additional 100,000.00. that sure seems like gouging to me. Sure would like to be able to re-sell at that price. Yeah, right. If you have a mortgage, it seems to be somewhat more reasonable, but if you don't, watch out, with no-one looking over their shoulders(meaning the mortgage people) the insurance companies can really sock it to you. So much for the american dream of actually owning your home free and clear. Our monetary(sp) system is set up so they only like you if you owe money. No wonder people put $ in their mattresses during the depression.

Debbie

[Bullishreturn]

Is anyone, beside me, getting gouged by the insurance companies for home owners insurance?

Debbie


This is where a LOT of people are being taken to the cleaners. Many insurance companies bank on the fact that people will sign up for a low rate, and then stick with the company over the years, and pay whatever the insurance company demands each year as they increase the premiums.

Here is some good advice- don't take your insured value, or the insurance premiums- for granted.

Every year, I check home prices around me, and I also call at least two or three other insurance companies, and tell them I am considering switching homeowner's insurance, and would they please give me some quotes. You would be surpirsed how much the cost of a nearly identical policy is between companies.

two years ago, my USAA jacked up the premiums a bit, after the hurricane seasons (I'm in Michigan- go figure), and the price seemed pretty high. I talked to other companies, and then called USAA back, and asked them about coverage and prices. I got them to knock a little off the premium hike, and then last year they dropped the premium back down a little more, so that now it is comparable with what it was three years ago. Not less, but not that much more.

It pays to know what it will cost to replicate your house, what your home contents are actually worth (walk around and videotape everything, then put the videotape in an offsite location, in case you have a fire and loose everything). The more data you have about what you had in the house, the better off you will be in the event you ever have a claim.

I'm lucky that I've never had to make a claim, but still, it pays to properly prepare just in case. And it pays to talk to both your present agency, and others, when it comes time to renew homeowner's policies.

[Wrngway]

Here's a link to search for assessments in Fairfax County, VA. There have been huge increases here over the last 10 years.

Fairfax Co, VA: http://icare.fairfaxcounty.gov/Search/GenericSearch.aspx?mode=ADDRESS

[Jonathan]

Hello Spaf,

I would agree but with one qualifier – Standard Deduction can be hard to beat.

Heh -- not in the DC area :)

We just bought a house in MD. We won't see "standard deduction" territory for many years -- unless the law changes.

As I was typing this and re-reading what I was typing, I came to the realization that.... Yes - maintaining a home mortgage does have the tax advantages.

It does. However, those tax advantages are merely a partial reimbursement for what you spend on your home, etc., and the fact that they're available to you depends upon the fact that the market for home prices has grown up around those deductions being available. In other words, you're getting the tax deductions because houses are more expensive due in part to the fact that you can get those tax breaks.

Frankly, I'd rather spend less money on a mortgage in the first place. But you work with what you're dealt.

If you don't have enough in deductions to beat the standard (minimum) deduction, then the standard deduction is actually a very good deal.

A better tax option, IMHO, is to reduce your adjusted gross income in the first place through business expenses, etc.--assuming you can do so.

[Jonathan]

This is where a LOT of people are being taken to the cleaners. Many insurance companies bank on the fact that people will sign up for a low rate, and then stick with the company over the years, and pay whatever the insurance company demands each year as they increase the premiums.

That's good advice. I'm a new homeowner, and right now, our rates are very low (thanks to being with the company a long time, and the fact that we get our auto insurance through them, too).

[tspforretirement]

No, just a BnW TV Western Show enthusiast. :)

2257



*******,

I got it! Thanks for the reference. :)


Hooah!

[tspforretirement]

This is where a LOT of people are being taken to the cleaners. Many insurance companies bank on the fact that people will sign up for a low rate, and then stick with the company over the years, and pay whatever the insurance company demands each year as they increase the premiums.

Here is some good advice- don't take your insured value, or the insurance premiums- for granted.

Every year, I check home prices around me, and I also call at least two or three other insurance companies, and tell them I am considering switching homeowner's insurance, and would they please give me some quotes. You would be surpirsed how much the cost of a nearly identical policy is between companies.

two years ago, my USAA jacked up the premiums a bit, after the hurricane seasons (I'm in Michigan- go figure), and the price seemed pretty high. I talked to other companies, and then called USAA back, and asked them about coverage and prices. I got them to knock a little off the premium hike, and then last year they dropped the premium back down a little more, so that now it is comparable with what it was three years ago. Not less, but not that much more.

It pays to know what it will cost to replicate your house, what your home contents are actually worth (walk around and videotape everything, then put the videotape in an offsite location, in case you have a fire and loose everything). The more data you have about what you had in the house, the better off you will be in the event you ever have a claim.

I'm lucky that I've never had to make a claim, but still, it pays to properly prepare just in case. And it pays to talk to both your present agency, and others, when it comes time to renew homeowner's policies.



Hi James 48843 and wv-girl,

I personally have not had a "completely" negative experience with my homeowners insurance company (USAA), but I have had lengthy discussions. Even had to have it "elevated." This occurred because we "upgraded" our living residence.

What I'm willing to say is that I know have an annual insurance premium that is less than $100.00 more than what I had on my previous house.

The value difference from the first home to the second is about 250%

The next question would be, "What is my annual insurance payment?"

I am willing to say it is between $50.00-$60.00 per month.

Lastly, many do not realize this but insurance companies take into value what it will cost to replace your current home (not the current value). It may have cost $100,000 to build it, but in a year, two, ten, how much will equipment, supplies and labor go up. I think this is one of the biggest over-riding factors for insurance companies to give the "initial" inflated premiums.

If you don't protest, then my insurance premiums will stay low. :blink:




HOOAH!

[tspforretirement]

Heh -- not in the DC area :)

We just bought a house in MD. We won't see "standard deduction" territory for many years -- unless the law changes.
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It does. However, those tax advantages are merely a partial reimbursement for what you spend on your home, etc., and the fact that they're available to you depends upon the fact that the market for home prices has grown up around those deductions being available. In other words, you're getting the tax deductions because houses are more expensive due in part to the fact that you can get those tax breaks.

Frankly, I'd rather spend less money on a mortgage in the first place. But you work with what you're dealt.

If you don't have enough in deductions to beat the standard (minimum) deduction, then the standard deduction is actually a very good deal.

A better tax option, IMHO, is to reduce your adjusted gross income in the first place through business expenses, etc.--assuming you can do so.


Jonathan,

I agree! I would like not to have to pay a mortgage. Just think what we could do with that mortgage money!!

But if you don't pay into a mortgage, then you pay rent, and as far as I know this is not an allowable IRS deduction and alot of places consider living in the public park illegal. :)

Now if one was a business owner of a rental property, now, that has some great deductions. Of course we'll always have "free-loaders" and adult off-springs come to mind. Whew! :o



HOOAH!

[tspforretirement]

Homeownership information (taxes, etc.) for Hernando, Florida.

There is a more direct access link, but the link I list below is a few steps back to explain the issues of connectivity (maximum number total accesses is 10):

This is their "public" access web link:

http://www.co.hernando.fl.us/tc/propertysearch.htm (http://www.co.hernando.fl.us/tc/propertysearch.htm)

[Wrngway]

No, just a BnW TV Western Show enthusiast. :)

A knight without armor in a savage land. :cool:

[tspforretirement]

A knight without armor in a savage land. :cool:


Hi Wrngway,

******* maybe without the armor, but I'm pretty sure he's got his +5 Avenger.


(NOTE: +5 Avenger is a reference to DnD and not the gun-powder based projectile weapons, then again, maybe there is one).


HOOAH!

[tspforretirement]

Hello All,

Sorry if this is off-track, but it seems the thread is going that way, but I've found some good information for those who wondering about the monies those Alaskan residents receive.

Many do not realize that individuals who claim Alaska as their State of residence DO get a check from the State of Alaska. It is the Alaska Permanent Fund Dividend. This year it pays: $1654.00 per person (includes children). That is if you are a family of four then multiply by four. No examples this time.

There are many qualifications to receive this, and of course, one of them is to establish actual residency. The following is the link for more information: https://www.pfd.state.ak.us/ (https://www.pfd.state.ak.us/)


NOTE: My driver license is still AK.


HOOAH!

[tspforretirement]

Propety Tax Information for North Carolina.

They do not have an accessible website that provides "up-to-date" information, but their website show previous taxations (in whole generalities) and many POCs.

http://www.dor.state.nc.us/taxes/property/index.html

A good note is that they show on the main page what/how to get exemptions.


HOOAH!

[tspforretirement]

Property tax information for Anchorage, Alaska.

http://www.muni.org/treasury/Content/treasury/prop_general.cfm


Hooah!

[tspforretirement]

Property Tax information for Shelby, Tennessee.

http://www.assessor.shelby.tn.us/content.aspx