[Chat] prop tax
jberlin
jdydee at verizon.net
Sat Jul 9 13:31:55 EDT 2011
i appreciate everyone's response. However I still don't get it. It
sounds as if I am still paying the tax for last years assessment and
then some. 3 years ago my assessment was 116k. It went up to 133k. Now
it is back down to 116k. Yet I'm paying more than the previous yrs.
On 07/08/2011 05:52 PM, Stephen J Gewirtz wrote:
> Joshua is right about how the taxes work. Under the homestead tax
> law, if your home is owned by you and is your principal residence,
> your effective assessment (what you actually pay taxes on) can go up
> by no more than 10% per year compounded. The 10% figure is used for
> state tax purposes (if you look at your bill, you will see that it
> shows both a City tax and a State tax). And the counties and
> Baltimore City are allowed to use the 10% figure or to adopt a lower
> figure -- Baltimore City uses a 4% figure -- for local tax purposes.
>
> If you look at your tax bill, it shows a State tax rate of 0.112% and
> a City tax rate of 2.268% of the assessed value of your house, and it
> gives the State and City taxes based on your assessment and based on
> those rates, as well as a total tax. Those two numbers will be a lot
> less than they were last year because of the lower assessments. Those
> numbers reflect what you would pay if there were no homestead tax credit.
>
> The next two lines on the bill are a State assessment credit and a
> City assessment credit. Those lines represent how much you are saving
> because of the homestead tax credit. And the line after that is the
> net tax amount, which is how much you have to pay if you pay in August
> or September (you get your tax reduced by one half percent if you pay
> in July).
>
> Let me take my own house as an example. Six years ago, my house was
> assessed a little bit more than $83K. Three years ago, it was
> assessed for a little bit more than $255K, i.e. it a little bit more
> than tripled. This year, it was assessed for a little bit more than
> $178K.
>
> So, six years ago, five years ago, and 4 years ago, I paid a tax on
> $83K of assessment (actually, I paid less than that. because the $83K
> was an increase over the previous assessment, and that increase was
> phased in over 3 years). Then, three years ago, I paid an actual
> State tax based on an assessment of $83K * 1.10 and a City tax based
> on an assessment of $83K * 1.04. And I paid an actual tax that went
> up similarly each of the following two years. So last year, my actual
> State tax was based on an assessment of $83K * 1.10^3 =. $83K * 1.331,
> and my actual City tax was based on an assessment of $83K * 1.04^3 =
> $83K * 1.124864. These figures were way below the actual assessment
> of $255K (actually, that $255K was phased in over 3 years, but the
> phase-in did not affect the actual tax)
>
> For this year, my assessment went down to $178K (and an assessment
> decrease takes effect immediately rather than being phased in over 3
> years as an increase would be). But my actual State tax is based on
> an assessment of $83K * 1.10^4 = $83K * 1.4641 = $121,520, which is
> much less than the actual assessment of $178K. And my actual City tax
> is based on an assessment of $83K * 1.04^4 =. $83K * 1.17 = $97K,
> which is also much lower lower than the actual assessment of $178K.
> The difference between a tax based on the actual assessment and the
> tax based on having the effective assessment go up each year by no
> more than 10% for State tax purposes and by no more than 4% for City
> tax purposes is the homestead tax credit shown on the bill as State
> assessment credit and as City assessment credit respectively.
>
> A useful figure is how long it will take your tax to double. Your tax
> can double in x years, where x is the solution to the equation 1.10 ^
> x = 2. In other words, your State tax will double in 7.27 years (i.e.
> will almost double in 7 years, and will a bit more than double in 8
> years). Your City tax can double in y years, where y is the solution
> to the equation 1.04^y = 2. In other words, your City tax can double
> in 17.67 years (i.e. will almost double in 17 years, and will a bit
> more than double in 18 years). One way to approximate this doubling
> time is to divide the annual percentage increase into 72. So, for
> example, State tax can double in approximately 72 / 10 = 7.2 years,
> and City tax can double in approximately 72 / 4 = 18 years.
>
> And yes, Joshua is right about how the system can be viewed as unfair
> to someone who has just bought a house. If mine had sold three years
> ago for its assessed value of $255K, the new owner would have paid a
> tax based on an assessment of $255K, i.e. would have paid roughly
> triple what I paid. And this year, he would have gotten a sizable
> decrease to a tax based on an assessment 0f $178K, but still would be
> paying a lot more than I am paying.
>
> Your assessment is what the assessor estimates that your house will
> sell for. So without a homestead tax credit, you basically are taxed
> on what the State estimates that someone will be willing to pay for
> your house. What the homestead tax credit does is to give some
> protection to long term homeowners so that, for example, when the
> assessed value of my house tripled three years ago, my tax did not
> triple over 3 years (since the increase is phased in linearly over 3
> years). It enables long term homeowners to keep their houses when
> their houses become far more desirable to people seeking homes.
>
> Steve
>
> On 7/8/2011 2:48 PM, Joshua Fruhlinger wrote:
>> OK, so I just looked at my own email and realized that was way too
>> complicated an explanation. Here's a simpler one:
>>
>> Your property tax bill is EITHER 2.268 percent of the assessed value
>> OR 3 percent more than you paid the previous year, whichever is
>> LOWER. If you've lived in your house since before the property
>> bubble, your assessment probably went up very fast in the mid '00s
>> and then came down a somewhat (but not back to the original level) in
>> the late '00s/early '10s. So for many people, even if the assessment
>> has gone done, a 3 percent INCREASE over your previous year's bill is
>> still going to be LESS than 2.268 percent of that reduced assessment.
>> Basically, the taxes you've been paying still haven't caught up to
>> your assessment, and will keep increasing 3 percent a year until they
>> do.
>>
>> (Note that I'm not sure if 3 percent is the exact value, but it's
>> something close to that if not. And this only applies if you live in
>> the property we're talking about -- that's why it's called the
>> "homestead tax credit" -- and if you were living in it the previous
>> year. The first year you own the house, youpay 2.268 percent of the
>> assessed value, and that's your baseline going forward.)
>>
>> jf
>>
>> On Jul 8, 2011, at 2:13 PM, Joshua Fruhlinger wrote:
>>
>>> If you're getting a homestead tax credit, your tax can only go up a
>>> little bit every year (I think 3 percent) as long as you stay in
>>> your home. But it will go up that amount until it hits the amount
>>> you'd pay without the credit. After the housing bubble in the
>>> mid-'00s a lot of property's assessed values went up so fast that
>>> people with the tax credit never caught up.
>>>
>>> For instance:
>>>
>>> Say in 2006 the assessment of your house doubled from 100K to 200K.
>>> Your theoretical tax would go from $2,268 to $4,356. But because of
>>> the homestead tax credit, your actual tax can't go up more than 3
>>> percent a year. So in 2006 you'd owe $2,336, in '08 $2,406, and in
>>> '09 $2,478.
>>>
>>> Then in 2009 they reassess your value down, from 200K to 150K. Now
>>> your theoretical tax drops from $4,356 to $3,402. But because of
>>> the homestead tax, you aren't paying anywhere near even that reduced
>>> amount. So the tax you actually pay in practice in 2010 is still a
>>> three precent increase -- $2,552. Your actual tax bill would only go
>>> down if your house lost a lot more value -- if it were assessed at
>>> less than $112,500 or so, with these numbers.
>>>
>>> jf
>>>
>>>
>>> On Jul 8, 2011, at 1:59 PM, jberlin wrote:
>>>
>>>> Have many people received property tax bills higher than last year
>>>> even with the lower property assessment?
>>>>
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