Anyone relocate to Austin & decide it wasn’t for them? (Dallas: how much, homes)

[ManaMist72]

The only negative we can think of when thinking about staying in Austin long-term is the broken property tax system. This is obviously a state-wide issue, and not limited to Austin - but poses a HUGE burden for Austin residents given that median home values have risen with no end in sight. I feel especially bad for retirees on a fixed income, and we have several neighbors who are retirees. I often wonder if they will eventually sell, and relocate to other States.

We have absolutely no idea how high our tax bill will be by the time we pay off our mortgage in 30 years, and that thought alone is terrifying.

Real estate values are rising faster than the inflation rate and economy and property taxes are rising faster than the average family's income, essentially pricing people out of their homes even with the Homestead exemption applied.

It's just a really unfair system, and makes staying here over the next 5-10 years, very questionable for us. I don't want to be priced out of our primary residence, even if we love everything else about Austin.

[Trainwreck20]

You have to look at your personal tax burden very closely, though. Just picking out one issue here and comparing to the lack of issue elsewhere is not very useful. If you decide to retire in Texas, the over-65 exemption ALMOST freezes your taxes - school taxes are 2/3 of the bill (or more) in most places, and the other taxing agents also have discounts for over-65. We compared to several places and, in the places we looked, property tax bills were similar (lower rates but higher values) or the retirement age discounts puny compared to Texas. In Colorado, for example, you have to wait 10 years AFTER buying a house to get the exemption, and then it is a 50% reduction in the first $200k (essentially a $100k property value exemption). Taxes will continue to go up very significantly even after you claim you exemption.

In short, while your property taxes are relatively high at retirement, they go up very little and provide a good hedge against inflation/increasing values.

[Trainwreck20]

Also, if you want to maintain a no state income tax status, that is only a handful of other states (Wyoming, Washington, South Dakota, Nevada, Florida, and Alaska. Tennessee will eventually be an income tax-free state when they kill their capital gains tax). And the states that do have an income tax generally still do have a property tax, although generally lower.

Not saying it is good or bad, but you really should dig pretty deep into the numbers. Just because your taxes aren't on one big bill in December does not mean they are really lower.

[ikoolu]

exactly the lack of state income tax more than offsets the higher property tax = remember your 401 and IRS withdrawals as subject to income tax and even taking in your 70's combined with the SS income you will be paying 15%

[ManaMist72]

Those points all make sense. I realize it’s not fair to cherry pick real estate tax issues here, without looking at all the numbers and comparing the big picture in terms of savings here vs other cities/states.

I still do think that the property tax, having no cap to annual increases poses a huge concern though. Some people are saying their bill goes up 10% each year. That certainly doesn’t align with their income increase.

What happens 10 or 20 years from now when the bill continues to go up annually at 10%? What does the bill amount to then when you’re on a fixed income? (I’m genuinely asking because I am surprised they are allowed to increase it at the max, annually).

To be fair, we looked at other States for relocation. Scarsdale, NY was one such city, and the tax situation seemed to be one of the worst we had looked at of all places considered. High State income tax, and also very high real estate taxes. (Lots of retirees were assessed high bills, and had to list their homes because they couldn’t afford the tax property tax hikes).

From what I recall when we looked into Colorado was - the State income tax was low, and real estate taxes seemed quite reasonable to us. But I never dug into the details because we ruled it out as a prospective move.

Also, Washington State is an income tax free state, and doesn’t seem to have outrageous property taxes either.

Again, I am only going off major factors here, and haven’t factored in every aspect of our cost of living for those areas since we decided against them, but appreciate the feedback and shedding light on other areas of consideration in terms of the overall financial outlook.

[earthisle]

Originally Posted by ManaMist72

Those points all make sense. I realize it’s not fair to cherry pick real estate tax issues here, without looking at all the numbers and comparing the big picture in terms fo savings here vs other cities/states.

I still do think that the property tax, having no cap to annual increases poses a huge concern though. Some people are saying their bill goes up 10% each year. That certainly doesn’t align with their income increase.

What happens 10 or 20 years from now when the bill continues to go up annually at 10%? What does the bill amount to then when you’re on a fixed income?

To be fair, we looked at other States for relocation. Scarsdale, NY was one such city, and the tax situation seemed to be one of the worst we had looked at of all places considered. High State income tax, and also very high real estate taxes. (Lots of retirees were assessed high bills, and had to list their homes because they couldn’t afford the tax property tax hikes).

From what I recall when we looked into Colorado was - the State income tax was low, and real estate taxes seemed quite reasonable to us. But I never dug into the details because we ruled it out as a prospective move.

Also, Washington State is an income tax free state, and doesn’t seem to have outrageous property taxes either.

Again, I am only going off major factors here, and haven’t factored in every aspect of our cost of living for those areas since we decided against them, but appreciate the feedback and shedding light on other areas of consideration in terms of the overall financial outlook.

Property tax is behind people being driven out of their homes. It's a fundamentally unfair system. Income tax scales with your income so it's fairer.

[Trainwreck20]

Although appraised values can go up by 10% each year (max, under HSE), the tax rates generally go down when there is that much across-the-board increase in value. That results in somewhat less increase in tax rate over time than appraisal rate. But yes, the potential for significant increases is there.

We have been through various scenarios of moving vs. not moving as the COL increases. There are several factors why we have not moved, and of course these are specific to us:
- We live in (and are happy with) a relatively modest house - 20 years old, 2400 sf - that puts us in a more manageable tax bill range. Our entire tax bill is still deductible on the fed taxes and will be for a few more years to come (at least).
- We are a two-income family. If you reverse-engineer our property tax and turn it into an equivalent income tax, there are very few places where we would come out ahead. Two income families are generally 'ahead' in a property tax instead of income tax situation - one property being taxed instead of two incomes.
- We both have good jobs here. If we moved, it would be hard to find two similar jobs in the same local. In addition, my area of expertise is heavily weighted to Texas. My wife's if heavily favored in really expensive places.
- We always have the option to get a cheaper (lower taxed) house. And while those appraisals and taxes continue to climb, so does our equity.

Long-term, appreciation will not maintain anything close to a 10% clip. Counting the recent high years, Austin area is at about 5.7% per year, although the tax rate has also decreased a bit - 2014 was 2.3798 for our house (CoA), but 2019 will be 2.1965. Not a huge drop, but a little more than 1% drop per year.

A $400k house bought this year that continued to appreciate at 5.7% would be worth $2.2 million after 30 years. The total of all the tax bills would be $628k if the rate remained constant and nothing other than a HSE. It puts you 1.5 million ahead. When you turn 65, those rates drop a bit and then increase much more slowly - around 1.5% per year instead of 5.7%, which should be well behind inflation.

Can you do better other places? Probably in some, maybe not in others.

I do like that people cannot 'hide' or 'off-shore' their property like they can their income. When I go by the multi-million dollar houses at the lake, I know they are paying a decent share of taxes .

[centralaustinite]

I also think that income tax is fairer, when your income decreases, so do your taxes.



But property is an asset and in Austin that means that you have an asset that appreciates in value, when paying the property tax is a burden, then you have a valuable asset that you can sell.

[Trainwreck20]

Originally Posted by centralaustinite

I also think that income tax is fairer

Not to agree or disagree, but to look at the opposite side of the coin - why should someone who makes 100k pay more than a person that makes 50k? The assumption always seems to be that because you can pay more you should pay more in taxes. In some ways, that is true, but from other angles it is just as arbitrary as property tax.

[Snowpacked]

Originally Posted by Trainwreck20

Not to agree or disagree, but to look at the opposite side of the coin - why should someone who makes 100k pay more than a person that makes 50k? The assumption always seems to be that because you can pay more you should pay more in taxes. In some ways, that is true, but from other angles it is just as arbitrary as property tax.

All taxes and fees are arbitrary. They are cleverly disguised and promoted as a designed system.