The other day I received an e-mail asking what the taxes are for a specific property.  This was from someone (approaching retirement) who now lives in an area where taxes have skyrocketed.  He was annoyed that his taxes have increased so much and wanted to move to an area with lower taxes.


The thing you need to know about property taxes is the actual "tax rate" probably doesn't change that much over time.  What increases taxes is the escalating values, making the total tax bill higher.  I don't know what the property tax rate in King county is (for example), but I would guess our rates in Chelan and Douglas counties are a little higher, yet our taxes are lower.  The reason for that is the total tax is based on value.  Our values are considerably less than King county so, therefore, our property taxes are actually lower... despite a higher base rate.


A typical tax rate of 1.25% (of assessed value) in this area would create a total tax of $2,500 on a $200,000 home.  This $200,000 home may be $400,000 in King county, thereby creating a much higher tax bill.  As the baby boomers are moving here to build or buy their retirement home, my advice to them is "Build or buy the home you want and need, but don't make it any bigger (or more expensive) than you really need it".   If you pay $200,000 for a home that increases in value 15%, your new tax bill will be around $2875 (up from $2500).  If you pay $300,000 your current tax bill will be around $3,750 and your future tax bill (at the 15% appreciation rate) will be $4,125.   Do you see the point I'm trying to make here?



The up side of buying a higher priced home is that appreciating values are generally on a percentage basis. 15% of $300,000 is $45,000 whereas 15% of $200,000 is only $30,000.   You've made an extra $15,000 (on paper anyway).  Looking at it in that light, in an escalating market, it is good to buy the most expensive home you can afford.  However, once the appreciation rate flattens out, you're stuck with higher taxes. 




Theoretically, you would think the local governing agencies, setting the property tax rates, would be able to lower the rate as values increase.  This isn't likely to happen, so weigh the pros and cons and make an informed decision based on YOUR goals and budget.


For answers to your real estate questions, contact:

Carol@TopPropertiesWenatchee.com



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