Property tax question (Miami: sales, insurance, house)

[pslhomie]

Here is my example:

You purchase a home for 400k. The tax site states that the market value is 270k. I go to the tax estimator and it asks for the sales price or the market value. If I put in 400k the taxes are about 6k. If I put in the current tax year market value the taxes are 3k.

Question: When you purchase a house, does the new market value equal the 400k or is it going to be closer to the 270K.

It is very vague and hard to determine what the taxes will be. Any experience?

[doggiebus]

Your taxes will be based on the sale price of the home. 2% of the sale price is close estimate what your taxes will be. Which is $8000 for for a $400k home. Once you're able to apply for homestead exemption, your taxes will drop to $7000. As an estimate figure the same amount for insurance on the house.

[r_k]

Your taxes will be based on the sale price, in part only. The taxes are going to be 2% (approx., assuming this is in Miami area) of the "assessed value", which in turn is the "market value" minus some exemptions and caps. The market value can go up and down from year to year, but is rarely exactly the same as the price you bought it for. If you got a really good deal, the market and assessed values may be greater than what you paid, or they may be lower than what you paid in a hot market.

These days property values are on the upswing. Expect your taxes to be 10 to 30% higher than last year's on a new purchase (speaking loosely, each case is different).

[tallrick]

When people pay big prices for properties, the neighbors will have to pay more in taxes, so thanks for stealing money out of your neighbors pockets.

[Fl1150]

Originally Posted by tallrick

When people pay big prices for properties, the neighbors will have to pay more in taxes, so thanks for stealing money out of your neighbors pockets.

Really ?

[bale002]

Originally Posted by pslhomie

It is very vague and hard to determine what the taxes will be. Any experience?

Originally Posted by doggiebus

Your taxes will be based on the sale price of the home. 2% of the sale price is close estimate what your taxes will be. Which is $8000 for a $400k home. Once you're able to apply for homestead exemption, your taxes will drop to $7000. As an estimate figure the same amount for insurance on the house.

Because it is somewhat vague and hard to determine with precision, the rule of thumb is indeed 2% of purchase price.

Therefore budget 2% of purchase price. Budget also 2% of purchase price for (wind) insurance.

If you are not comfortable with those numbers, then think two, three and four times about buying, because it signals that you may not be able to afford it.

Then, if the actual property tax comes to less than that number because of the difference in purchase price and assessed value for property tax purposes, consider it a windfall.

If you qualify for homestead, thereafter count on a 3% annual increase in assessed value, whether the actual market value goes up or down.

On top of that, there could be slight annual increases in millage rates.

Therefore, budget 2% of purchase price when making the initial calculations and project forward at least 3% annual increases from that level to determine a comfortable level of affordability over a period of years.

If you depend on a more precise calculation, then you may not be able to afford it.

A good, conservative rule of thumb, then.

Unfortunately, when it comes to housing policy in this country, especially in the mid-2000s, it has been more the rule of dumb.

Anyway, Good Luck!

[pslhomie]

From what I have also found the taxes the first year will be the same as the previous owner and their taxes are about 3k. The next year they take your purchase value and average it in with the other home values in the area and determine what the value will be. For instance if the house costs 400k and the house is tax appraised at 350k then my taxes would be based on that and not necessarily the purchase price. Deduct the homestead exemption transfer and the save our homes discount I figure the taxes to be between 4 and 6k.

Yes the higher you pay for a house the higher everyone in the hood will pay. It will not amount go very much a dollar or two more because the house is within fair market value.

Please let me know if I am wrong and how I am wrong.

[bale002]

Originally Posted by pslhomie

For instance if the house costs 400k and the house is tax appraised at 350k then my taxes would be based on that and not necessarily the purchase price. Deduct the homestead exemption transfer and the save our homes discount I figure the taxes to be between 4 and 6k.

Please let me know if I am wrong and how I am wrong.

Yes, in the first year or two those are very good estimates; as part of that, as we have observed, the homestead exemption is worth $1,000 per year forever, plus whatever the transfer discount in the first several years.

However, in the long run, it will tend toward 2% of the purchase price. Moreover, it is still prudent to factor in 2% of the purchase price from the very beginning also to provide cushion for any unexpected expenses, such as maintenance.

Unless maybe one is expecting the rate of increase in house value to outpace the increase in carry expenses. In such case, that smacks a bit of speculation. If so, please don't do it with borrowed money, we know how that movie turns out.

All the best!

[observer]

Originally Posted by tallrick

When people pay big prices for properties, the neighbors will have to pay more in taxes, so thanks for stealing money out of your neighbors pockets.

You are wrong on this one tallrick.

In Florida we have what is called "save our home program" which has been in effect since 1995. This limits the assessed value of the home to no more than 3% a year. One can see the link below for the specific information.

Save Our Homes

[doggiebus]

Originally Posted by pslhomie

Yes the higher you pay for a house the higher everyone in the hood will pay. It will not amount go very much a dollar or two more because the house is within fair market value.

Please let me know if I am wrong and how I am wrong.

Not quiet right, your sale price, doesn't really affect the taxes of the current neighbors. I have original owners in my neighborhood from 1969 that are paying less than $1500 in taxes, based on their original sale price. Yet a neighbor that bought at the peak of the market is paying $10,000 in taxes based on his sale price. Every house in my neighborhood is paying based on their sale price, yet we have similar homes, similiar lots, same services, etc. The tax system really isn't fair to the new buyers.