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Do you seriously believe that the government pays back tax income to homeowners? It doesn't. That's not how tax deductions work.
Homeowners directly subsidize the existence of renters. Property taxes pay for everything in our world. Do you like garbage collection? Renters do, but they don't pay a dime for it. Mail service? Education? City beautification? Public spaces? Local hospitals?
Thank the homeowners, because they pay for all of it.
I got tired of hearing arguments like this, and I worked out a deal with my landlord. I live in a house, so I know exactly what the property taxes are.
I made a deal to break out the property taxes separately and reduce the rent by that amount, then add the actual property taxes divided into 6 equal monthly payments. (The property taxes are billed twice a year.)
This way, I am on the hook for any property tax increases and also benefit from any property tax reductions.
In most states, rental property is taxed at higher rates than owner-occupied homes. For example, in Michigan, the school tax rate on rental property is four times the school tax rate on owner-occupied primary residences. Homeowners pay all of it? In Michigan, they don't even come close.
I happen to own an office building that we rent out to doctors (including space that we use for our own practice). I can assure you that we pass on property taxes to our renters. They pay for it. I like it. This year we raised our rent by 6.8%, which covers property taxes. The renters pay for it without grumbling (at least not openly).
As someone else said, garbage collection and mail service are not paid for by property taxes. Local public hospitals generate their own income from the services they provide and don't depend on property taxes. They sometimes issue bonds when they need money to finance a project or two.
Let's face it: the mortgage interest tax deduction is an entitlement created by tax policy to influence people's behavior. You can argue the merits of the behavior it is trying to influence, but it doesn't change that fact that it is an entitlement.
Your Mileage May Vary (YMMV). In general, property taxes are explicitly passed to tenants of commercial (retail, office) property - as you are doing in your example.
I'm a renter and I believe property taxes should be explicitly passed to residential renters, but it's very rare to see this in a residential lease.
Services like garbage collection are paid for in some areas through property taxes, in other areas it is paid privately by property owners (or, under some leases, by commercial or residential tenants).
Home ownership and property rights are vital to the success and growth of a market economy. The governments actions are meant to spur home ownership. Any renter who feels they are getting the short end of the stick can buy a house.
Someone always loses with any type of deduction. For example, College deductions encourage our society to improve its education and therefore make progress and compete globally... but one could argue that it is unfair to those people who choose not to go to college.
No, many renters who feel they are getting the short end of the stick CANNOT buy a house.
I cannot afford a 3BR house on a standard 10,000 square foot lot. What I can afford is a tiny house on 2,500 square feet of land.
The only thing in my way if government, because my affordable home does not meet minimum lot size standards.
If government REALLY wanted to spur homeownership, small lots and small houses would be allowed - even encouraged.
Government is more about redistributing goodies to upper/middle class homeowners than about spurring homeownership.
The liberals cried foul and decided not to free the housing market, but to promote easy credit so people could buy more home than they could afford.
My free market solution would allow millions of Americans to buy just the right amount of house they CAN afford, without any government handouts, entitlements, or gimmicks.
Canada, Great Britian, and Australia all have higher home ownership rates than the U.S., and they have no MID. If your buying a home for the purpose of the mortgage deduction, then you bought for the wrong reasons. The government through many efforts has tried to promote home ownership. Just look at how many people for a while thought their single-family home (or condo) was an investment.
I also believe you shouldn't get a deduction just because you have kids. Actually you should probably pay a fee for having them. Just because you choose to have kids, why should you get a tax break. If your a homeowner and then decide you don't want kids your paying for the school system. Yes, you could argue that a good school system helps your community, but why should I or someone else pay for other people's kids or homes.
In most states, property taxes are higher on rental property than on owner-occupied homes of equal value....
My experience has shown the opposite.
I have owned Multi-Family-Residences in three states [Ca, Ct, Wa]. In each of those states the property tax mil-rate is the same for everyone.
Commonly rental property is assessed lower than a Single-Family-Residence, such that rentals pay lower taxes.
If there is any difference at all [and often there is no difference], then Single-Family-Residences pay higher taxes.
I currently live in Me, and I have been looking at more MFRs to buy. Here the general rule still runs true that Single-Family-Residences tend to pay higher property taxes than Multi-Family-Residences pay.
Before this current recession even minimum-wage earners could afford to buy a house. So who 'cannot'?
Dip down into households with less then minimum-wage and your looking at households often on dole. Should those on welfare be buying homes?
At my last (most recent) job, I worked with two dozen other people, all of whom were paid within 20 cents per hour of minimum wage. Most were over 30, including several over 50 and one over 65. Only two were married and only two had children to support.
Nobody owned a home.
I just ran some numbers on a 'how much house can you afford' calculator, and plugged in the numbers for interest rate (I used 5 percent) property tax rate (2 percent here), monthly income, and monthly debt. In order to get the largest amount possible, I plugged in zero for monthly debt.
According to the calculator, someone working full time at minimum wage with a $5,000 down payment (who earns minimum wage AND has $5,000 in the bank?) qualifies for a loan of $48,937 and thus can buy a home up to $53,937.
Good luck finding a home at that price! In my area, starter homes were selling around $150K before the bubble burst, and the low-end homes have pretty much kept their value.
I have owned Multi-Family-Residences in three states [Ca, Ct, Wa]. In each of those states the property tax mil-rate is the same for everyone.
Commonly rental property is assessed lower than a Single-Family-Residence, such that rentals pay lower taxes.
If there is any difference at all [and often there is no difference], then Single-Family-Residences pay higher taxes.
I currently live in Me, and I have been looking at more MFRs to buy. Here the general rule still runs true that Single-Family-Residences tend to pay higher property taxes than Multi-Family-Residences pay.
Equal tax rates are pretty much standard in the Northeast, unequal tax rates are pretty much standard in the South. The rest of the country is a mixed bag.
Even though property tax rates are equal in California, Proposition 13 has ON AVERAGE extended greater benefit to homeowners than to landlords because ON AVERAGE rental properties are sold more often than owner-occ homes and thus rental property is more frequently assessed upward to full market value. Yes, many landlords do buy and hold...and hold, but many landlords frequently buy and sell, triggering assessment jumps.
I will have to check property tax rates in Washington state, but I did see a newspaper article in the Columbian (Vancouver) a few years ago which said the local property tax rate on apartments was considerably higher than the rate on single-family homes. (So Washington might have a local option where higher rates on apartments exist in some areas and not in others.)
Four units is the usual threshold at which apartments are taxed as commercial property which brings a higher tax rate.bbb
At my last (most recent) job, I worked with two dozen other people, all of whom were paid within 20 cents per hour of minimum wage. Most were over 30, including several over 50 and one over 65. Only two were married and only two had children to support.
Nobody owned a home.
I just ran some numbers on a 'how much house can you afford' calculator, and plugged in the numbers for interest rate (I used 5 percent) property tax rate (2 percent here), monthly income, and monthly debt. In order to get the largest amount possible, I plugged in zero for monthly debt.
According to the calculator, someone working full time at minimum wage with a $5,000 down payment (who earns minimum wage AND has $5,000 in the bank?) ...
Who does? Folks who save.
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