If you came to Austin from another state where you paid income tax, but had a cheaper property tax... (Spring: 2011, houses)

[gimme it]

did you find that you were spending more in Austin? I'm wondering what's better: paying higher property tax and no income tax vs. living somewhere where the property tax is lower, but you have to pay income tax. Also, is the cost of living, taxes, etc. relatively cheaper in Austin than on the East or West coasts?

[10scoachrick]

Originally Posted by gimme it

did you find that you were spending more in Austin? I'm wondering what's better: paying higher property tax and no income tax vs. living somewhere where the property tax is lower, but you have to pay income tax. Also, is the cost of living, taxes, etc. relatively cheaper in Austin than on the East or West coasts?

OK, I'll bite. Based on our current income and property taxes in Sandy Springs, GA(just outside of ATL), we will even things out when we move to Austin--JUST looking at these two factors. Unfortunately, DW is looking at houses costing $100K more than our current home so we will take a tax hit if she gets her way. Our prop taxes on our current ~$340K home are under $3K per year. DW's dream house in Avery Ranch will hit us for ~$11K in property taxes. I guess I won't complain unless our income drops dramatically.

[gimme it]

Good to know. $11k--ouch!! Hopefully, your dw can fall in love with a less expensive house

[10scoachrick]

Originally Posted by gimme it

Good to know. $11k--ouch!! Hopefully, your dw can fall in love with a less expensive house

Don't I wish! I have to admit that I really like this house as well. It would be fun to find something with 20% less square footage with a comparable price per foot. That would help the numbers on both ends!

[holden125]

Originally Posted by gimme it

Good to know. $11k--ouch!! Hopefully, your dw can fall in love with a less expensive house

Could be worse. Property taxes in the suburbs outside New York often outpace $11,000 by quite a bit, and this in the state with the highest income tax in the nation. But it's mostly worth it.

[FromCalitoSteinerRanch]

I can't find my post on this but here it goes again.

We pay about 2.69%, which becomes about $8,900 for the year on a ~3,700 sq. ft. home on 1/4 acre. We do, however, walk to two exemplary schools, so we see part of our taxes as supporting our girls education without having to pay for a private school in CA to be the same level. A private school doesn't lower our AGI either!

But, you probably want to see numbers. Well, we are single income, and I make an good 5 figure income. After our write offs, I never paid more than about $2K in CA state inc. tax, so here we save that, but we then pay much higher property tax. We see it as wash though because of the school mental "factoring" we include in our perception.

Also, the equivalent house, in an equivalent area, in Orange County, where we moved from, would be about $800K-$1 million, which would be about $8,200-$12,000/yr. property tax based on valuation.

So, we pay about the same property tax, and if we could afford a $1 million dollar home, our CA state income tax would no longer be $2K/year, more like $8K-$10K per year, and we would have to pay for private school!!!

So, I guess you have to factor whatever is important to you into the equation.

[austifornian]

All things considered I think I would rather pay the income tax. With income tax when your income changes your tax burden changes with it. It might not be pleasant, but when you are making money, you can afford to pay taxes. Property tax is totally unrelated to income (except in the sense that you have to have a certain income to buy into a property) and are based on a non liquid asset. If your income remains stable or goes down and you live in an area where property values are stable or rising your tax burden goes up. You are paying taxes on a gain not realized.

Take CalitoSteiners example of a ~300K house with a 2.7% tax rate. Austin continues to boom and Steiner becomes the most desirable place to live in Austin and 5 years down the road that house is now appraised at $550K.

2008 = appraised value $300K, taxes $ 8100
2009 = appraised value $330K, taxes $ 8910
2010 = appraised value $363K, taxes $ 9801
2011 = appraised value $399K, taxes $10781
2012 = appraised value $439K, taxes $11853

The homeowners exemption has kept the appraised value of the property $100K below the market value but the taxes on the property have gone up 33% since the property was purchased and have no relationship to income.

Granted, this is an extreme example by Texas standards but it is not out of the realm of possibility. It certainly brings home the point of why people are not always excited to see their property values go up.

[MDtoDS]

We will end up saving about $500/month in moving to Austin when compared to what we pay in MD.

[TexasHorseLady]

With a property tax, you can protest your tax valuation (I know, I've done it, successfully), and there are various exemptions and special valuations. With income tax, not so much.

[wsugrad03]

We're looking at moving to Austin from Seattle. Quick question: I think you can claim a deduction for property tax on your income taxes. Because Austin has outrageous property taxes, are you seeing any of that money come back to you in your income tax deductions? Does the higher property tax act as a good federal income tax shield for you than it would in other states where property taxes are more down to earth?

It just stinks that your property tax increases every year instead of staying locked for what you bought the home for. I would rather pay income tax in this case. People have been talking about wanting to establish a cap? Does anyone think this will happen anytime soon?

However, if you have kids and you see that your kids are going to fine public schools and the roads are really nice then I think one can justify the added expense. The road quality up in Seattle is terrible!