Property Taxes in Texas for a Retiree. What do you do? (Houston: for sale, car registration)

[turf3]

1) Daughter may be confusing PMI, mortgage insurance, with house insurance, and mixing it into the total cost.

2) In Texas you have a homestead exemption for your primary residence (it's easy to establish) and this knocks a bit off the taxable value of the house. Most taxing entities also have an over-65 exemption which knocks some more off. If eligible you should make sure both of these are in place (you have to make application for the over-65 and since I'm not eligible I don't know the details).

But, you are seeing the downside of relying on property, sales and franchise taxes rather than individual income tax for revenue. It is common in the fancier areas for elderly residents to become "tax poor" as their old, small house in a neighborhood that has grown valuable ends up having tax bills their (usually) fixed income can't support. Then they are faced with relocating to a distant, usually less convenient, lower-tax area, or living in poverty among the middle-aged and younger new residents in their McMansions. This was particularly acute 20 years ago or so in the Park Cities - by now, all those people and their old small houses have probably been driven out.

Personal state income tax has its own downsides, which are harped on to no end, and these are real. But the alternatives are not problem-free, and don't let anyone tell you they are.

[FalconheadWest]

Originally Posted by turf3

It is common in the fancier areas for elderly residents to become "tax poor" as their old, small house in a neighborhood that has grown valuable ends up having tax bills their (usually) fixed income can't support. Then they are faced with relocating to a distant, usually less convenient, lower-tax area, or living in poverty among the middle-aged and younger new residents in their McMansions.

This is not that true today because the elderly can defer their taxes which means they aren't paid until the house is sold, out of the proceeds. If they die, the estate pays the deferred taxes out of the estate after death. Many elderly are able to stay in their houses because of this.

[Mark Senior]

And many have used reversed mortgages. Not saying if that is "good" or "bad" but many have done that.

[Trainwreck20]

Assumptions:
- House value: $220,000
- Down payment: 10% (mortgage for $200,000)
- Interest rate: 3.5%
- Property tax: 3%
- Mortgage Insurance: 0.5%
- Home Insurance: 0.5%
- Homestead exemption: subtract $20,000 off the value of the home for taxing purposes

Given those numbers:
Mortgage payment (P&I): $900/mo.
Tax payment: $500/mo.
Home and Mortgage Insurance: $175/mo.

If you pay at least 20% down, the mortgage insurance (~$85/mo.) will go away.
You likely can get slightly better than 3.5%, depending on credit scores and amount down.
Taxes are generally a little less than 3%

HOA fees might be included in there somewhere and can range from as little as a few dollars a month to several hundred for other areas.

For a good tax comparison, you will need to compare the offset due to the elimination of state income taxes versus the increase in property taxes. That comparison should consider the standard deduction vs. itemized deduction.

Edit: Just checked a random property in Friendswood. Base tax rate is about 2.62% and although the exemptions vary from entity to entity, they are in general well above the $20k shown above (FISD is $25k + $20k more if over 65, Galveston County is 20% (~$44k) + $60k for over 65, city of Friendswood is 20% (~$44k) + $25k if over 65. Those make up the bulk of the tax dues. So the homestead exemption is worth something around $32k (not $20k). Over 65 really cuts the value by another $40k or so.

[rodtod11]

Originally Posted by StealthRabbit

EZ to get the taxes on properties from county -CAD sites.

do be aware of some places being under senior / disability / homestead exemptions

You need to do your own research if daughter is bringing insurance to equation. Who is she talking to? a realtor or a lender? Get the CORRECT info, not some guess.

1) I would keep a property in CA to secure your Prop 13. I have worked with thousands of CA transplants, and the happiest kept their Prop 13 and fled to CA for retirement.

2) consider low tax options in TX. There are many ways to do that, fixer / barn with a dandy apartment inside / very nice Mobile Home / lower tax districts (there can be HUGE differences within the same town).


The assessor is the second place I go to when researching properties.

BTW: I was able to negotiate a 70% assessment drop on one of my TX properties this yr. That helped

My TX taxes are high, but only 1/10th my WA state taxes ($44/day), up from $3/day on same property, just older and more worn out.

Let me ask you......You have worked with CA transplants. If we move , there would be no reason to move back. Yet, you said "the Happiest" moved back to CA. So, if thats the case, how is Texas for retirement??? I want a decent house, and lower costs of living. Will I get that in Texas? Again, the reason to move is to be near the kids. But I do not want to move and then have less than I do now. Calif. real estate prices are very high. I have 80K to put on a house when I do move, and have been looking at doing a reverse mortgage when I do buy a home. Soooo....all that being said.....am I hurting myself financially by moving?

[Trainwreck20]

You won't confuse the weather or scenery with California, for the most part....

[Ultrarunner]

Most of my friends that retired to Texas are staying and many moved to be close to kids and many moved the greater Austin area although a significant number seem to have landed around Tyler.

All of them have mentioned Texas property tax to me... without exception so it is an issue... the value of no income tax increases with income... many retired are not high income... at least those I know.

One mistake is they see what the proceeds from their 1960 1300 square feet Bay Area home will buy and overbuy in Texas and then the tax thing comes up...

Case in point... friends paid 32k for their 1960 home when it was 12 years old and walked away with 700k... their SF Bay area property tax on their 1300 square foot home was $1600...

In Austin they bought a 2600 square foot home and their property tax is 5x+ their California property tax.

Also... property tax deferment is not the same as not owing property tax... California had deferment too and it was suspended when real estate crashed.

One more California feature is it may be possible to sell your home and retire/downsize keeping your low property tax from the home you just sold... and your kids can apply to keep your tax basis in certain situations...

This is why Stealth mentioned consider keeping California property.

[ikoolu]

you are worrying to much property taxes- if you have a nest egg in a 401 or IRA the saving from state income taxes by out way the issue or property taxes- factor in the lower electric rates, car regestration - etc you will so much further ahead

you really need to run the numbers - make a very detailed budget - list all your taxable assets, insurance including health insurance premiums etc = then go to Texas and spend a few days with professionals - we had to make two trips - to get a real feel of the cost of living - food - gas, travel costs- finally do you want to continued to be FEE to death by governor moonbeam - fee for this fee for that

you might want to spend a few hours with a financial planner to get help -

lastly - are you sick and tired of the BS in Calif- sick of the drive - sick of the people and redness - sick of the daily crap you have to deal with living there=== by all means its painful to leave the place where you born- raised your kids - the only home we ever had - but the slower pace- the great people - the cost of living - far out weights my concern over property taxes and weather

we looked in Prescott -Washington, Oregon - take a week get to know the people and do some homes work and you will figure it out

the real big surprise is the home owners instance is a heck of alot higher - but we are stuck with Farm Bureau Insurance because we are 12 miles outside in Waco in " country" but i can get to home depot in 15 minutes and only 1 light and 1 stop sign -

Good luck it sure is an adventure

PS talk to the neighbors in any area also - we were invented for dinners - breakfast several times in our travels and you will quickly get a feel of the neighbor hood- - fast- one thing about Texans they aint afraid to ask you if you lean left or right LOL

[Ultrarunner]

Originally Posted by ikoolu

you are worrying to much property taxes- if you have a nest egg in a 401 or IRA the saving from state income taxes by out way the issue or property taxes- factor in the lower electric rates, car regestration - etc you will so much further ahead

you really need to run the numbers - make a very detailed budget - list all your taxable assets, insurance including health insurance premiums etc = then go to Texas and spend a few days with professionals - we had to make two trips - to get a real feel of the cost of living - food - gas, travel costs- finally do you want to continued to be FEE to death by governor moonbeam - fee for this fee for that

you might want to spend a few hours with a financial planner to get help -

lastly - are you sick and tired of the BS in Calif- sick of the drive - sick of the people and redness - sick of the daily crap you have to deal with living there=== by all means its painful to leave the place where you born- raised your kids - the only home we ever had - but the slower pace- the great people - the cost of living - far out weights my concern over property taxes and weather

we looked in Prescott -Washington, Oregon - take a week get to know the people and do some homes work and you will figure it out

the real big surprise is the home owners instance is a heck of alot higher - but we are stuck with Farm Bureau Insurance because we are 12 miles outside in Waco in " country" but i can get to home depot in 15 minutes and only 1 light and 1 stop sign -

Good luck it sure is an adventure

PS talk to the neighbors in any area also - we were invented for dinners - breakfast several times in our travels and you will quickly get a feel of the neighbor hood- - fast- one thing about Texans they aint afraid to ask you if you lean left or right LOL

What is redness in California... isn't CA a Blue State?

I've looked in Washington and Oregon and made a commitment in Washington... not sure it is exactly cheaper but when I bought WA had passed I-747 which is similar to Prop 13 in California... my home was assessed within a few thousand of what I paid... all was good... then Prop I-747 got tossed and 18 months after buying my assessment increased 80%... what a shock that was and it made me re evaluate long term... I'm now paying $1,000 a month property tax for a home renting for $1800....

[rodtod11]

Originally Posted by Trainwreck20

You won't confuse the weather or scenery with California, for the most part....

Hahaha...."Trainwreck20", I live in the California Desert . A town called Sun City.....which it is for a reason! 80 degrees in the winter during the day. Typical spring is 95 to 105, summer always over 100, several days over 110 , Autumn....could be 80 could be 100. Humidity can be anywhere, but is more often dry. Although August saw humidity from the 60 % and 70% and once or twice 80 to 90 percent. Then it dropped like a rock to 4%. So....were HOT here! I cant afford the coasts. I'm not really sure how anyone does!