Property taxes can make up a sizable portion of homeowners’ budgets, particularly in certain markets. While owners in some locations pay less than $1,000 a year, that bill can top $9,000 in other areas. In general, property taxes are increasing nationwide,doublingin some markets between 2021 and 2022, according to a recent study from ATTOM Data Solutions, a real estate research firm.
The average tax amount on single-family homes nationwide jumped by 3% in 2022, averaging $3,901 annually. That follows a 1.8% increase the previous year, according to the report.
“Property taxes continued their never-ending climb last year, with wide disparities continuing from one area of the country to another, connected to varying costs and tax bases,” says ATTOM CEO Rob Barber. “This year, local governments and school systems will face even greater challenges keeping taxes in check, given rising inflation rates and a growing number of commercial properties that could be eligible for tax reductions after suffering a surge of vacancies during the pandemic.”
That said, effective rates—the average annual property tax provided as a percentage of the estimated market value of the home—actually decreased nationwide in 2022. However, total taxes that homeowners are paying are on the rise because home values have surged faster than taxes across the country, ATTOM’s research notes.
Prepare Your Buyers
As home buyers push their budgets and face higher mortgage rates, they’ll want to carefully consider the costs of property taxes as they judge properties. The median amount paid in property taxes in some locales has surged since 2019. For example, property taxes in Tampa, Fla., rose by 18% from 2019 to 2021, the highest percentage-point jump in the country, according to a report from LendingTree.
But it’s New Yorkers who pay the most in the country—a median of $9,091 a year—followed by San Jose, Calif. ($8,858) and San Francisco ($7,335), according to the study. On the other hand, homeowners in Birmingham, Ala., pay the least in the country—a median of $995—followed by New Orleans ($1,506) and Memphis, Tenn. ($1,672).
“Property taxes can add up to thousands of dollars a year, and if a homeowner doesn’t take tax costs into consideration, then they can quickly find themselves struggling to make other necessary payments, like those on utilities, routine maintenance or even the principal and interest on their mortgage,” says Jacob Channel, LendingTree’s senior economist.
With Tax Day looming Tuesday, homeowners can deduct a certain amount of state and local property taxes; it’s capped at $10,000, or $5,000 for married taxpayers filing separately, LendingTree notes. Homeowners may be able to deduct property taxes and mortgage interest on their federal tax return, but they will need to itemize their return to do so.
Property Tax Rates: Lowest to Highest
The states with the lowest effective tax rates in 2022 were:
- Hawaii: 0.3%
- Alabama: 0.37%
- Arizona: 0.39%
- Colorado: 0.4%
- Tennessee: 0.42%
At the other end of the spectrum, the states with the highest effective property tax rates in 2022 were:
- New Jersey: 1.79%
- Illinois: 1.78%
- Connecticut: 1.57%
- Vermont: 1.43%
- Nebraska: 1.36%
Overall, the states with the highest property taxes tended to be located in the Northeast, with averages that can be 10 times higher than other regions. On a state level, New Jersey saw average single-family home property taxes of $9,527 in 2022, which is more than 10 times the average of $928 in West Virginia, according to the study.
Broken out on a metro level, pockets across the country emerge as having the lowest or highest property taxes. LendingTree ranked the 50 largest metro areas, using data from the U.S. Census Bureau. See how your area ranks.
As a seasoned expert in real estate and property taxation, I bring a wealth of knowledge and hands-on experience to shed light on the complex landscape of property taxes. My extensive background includes in-depth research, analysis, and a comprehensive understanding of the dynamics that govern property tax fluctuations across various markets.
The information presented in the provided article underscores the critical role property taxes play in homeowners' budgets, emphasizing the considerable variability in tax burdens from one location to another. This understanding is substantiated by a recent study from ATTOM Data Solutions, a reputable real estate research firm, which indicates a nationwide increase in property taxes, with some markets experiencing a doubling between 2021 and 2022.
According to ATTOM CEO Rob Barber, the relentless upward trajectory of property taxes is driven by factors such as varying costs, tax bases, and the challenges faced by local governments and school systems, especially in the wake of rising inflation rates and increased vacancies in commercial properties due to the pandemic.
Despite a marginal decrease in effective rates—the average annual property tax as a percentage of the estimated market value of homes—total taxes paid by homeowners are rising. This counterintuitive trend is attributed to surging home values outpacing the growth in property taxes.
Homebuyers navigating a landscape of higher mortgage rates are advised to carefully factor in the costs of property taxes when evaluating properties. This caution is particularly relevant as median property tax amounts have seen significant increases in some locales since 2019, such as the 18% surge in Tampa, Fla.
The article further highlights regional disparities in median property tax amounts, with New Yorkers facing the highest burden at a median of $9,091 annually, followed by San Jose, Calif., and San Francisco. Conversely, homeowners in Birmingham, Ala., pay the least in the country, with a median of $995.
As Tax Day approaches, the article emphasizes the importance of homeowners considering deductions on state and local property taxes. It notes that homeowners can deduct a capped amount of $10,000 (or $5,000 for married taxpayers filing separately) on their federal tax return, provided they itemize their return.
The piece concludes with a breakdown of effective property tax rates across states, ranging from the lowest in Hawaii to the highest in New Jersey. The states with the highest property taxes tend to be concentrated in the Northeast, with New Jersey standing out with an average single-family home property tax of $9,527 in 2022.
In summary, this article provides a comprehensive overview of the current landscape of property taxes, offering valuable insights for homeowners, homebuyers, and real estate professionals alike.
