Property taxes: how do you cope? (Houston, Seymour: renters, house, tenants)

[Trainwreck20]

I always tell people that if you are a couple with a dual income, don't require a massive home, and plan to have kids in public schools, you can do pretty well in most places in Texas. Yes, of course the math will vary from person to person (or couple), but if you double your income in an income tax state, your tax essentially doubles. With only property tax, it is basically unaffected.

On the flip side, as a single person without kids and a desire to live 'upscale', you will pay through the nose.

[Lowexpectations]

Originally Posted by StealthRabbit

everything 'depends'

such as in Oregon 'low income' is not much help, (They have no sales tax, but state funds / schools are in really bad shape)
Oregon Taxable Income Rate
$3,350 - $8,400 7.00%
$8,400 - $125,000 9.00%
$125,000+ 9.90%


Always do the math!

I will NOT join the folk on this thread that are using 'deductibility' as a way of dealing with High TX property taxes.

Say you are in a 15% tax bracket... you will be getting spending $10,000 and getting a mere $1500 'back' (if you get any).

I try to deal with all my expenses by offsetting them with INCOME. Thus in TX, I keep an extra rental property to provide enough extra income to pay for ALL my TX property taxes. In WA, I rent out my 1800SF daylight basement to 'help' pay for property taxes.

That's still not true. You only start saving on the dollars that exceed the standard deduction which makes the "savings" worse. If you were mfj and your deductions totaled 13k your "savings" is only 400 x .15 = $60.00. To "save" 1500.00 at the 15% marginal bracket your deductions would need to total $22,600.00

[Trainwreck20]

Assuming ~$70k income
$160k loan on a $200k house.
$6400 in interest
$4800 in taxes
$1000 in sales tax (by table - can be much higher if you keep receipts)

Total 'automatic' deductions (married couple filing jointly):
$12,800

Standard Deduction:
$12,600

So about a wash in that case, unless you double-dip property tax, which will put you about $5k over standard deduction, or about $1,250 in savings (25% bracket).

Now, assume a combined income of $140k in a slightly bigger house:
$240k loan on a $300k house.
$9600 in interest
$7200 in taxes
$1500 in sales tax (by table - can be much higher if you keep receipts)

Total 'automatic' deductions (can be others):
$20,800

Standard Deduction:
$12,600

$8,000 over standard and probably at a 28% rate, or $2240 in savings (lowering effective property tax to $5000). Double-dip taxes in a year and you save $4300 over standard deduction (with no savings in non-itemized years over or above the standard deduction).

[Lowexpectations]

Originally Posted by Trainwreck20

Assuming ~$70k income
$160k loan on a $200k house.
$6400 in interest
$4800 in taxes
$1000 in sales tax (by table - can be much higher if you keep receipts)

Total 'automatic' deductions (married couple filing jointly):
$12,800

Standard Deduction:
$12,600

So about a wash in that case, unless you double-dip property tax, which will put you about $5k over standard deduction, or about $1,250 in savings (25% bracket).

Now, assume a combined income of $140k in a slightly bigger house:
$240k loan on a $300k house.
$9600 in interest
$7200 in taxes
$1500 in sales tax (by table - can be much higher if you keep receipts)

Total 'automatic' deductions (can be others):
$20,800

Standard Deduction:
$12,600

$8,000 over standard and probably at a 28% rate, or $2240 in savings (lowering effective property tax to $5000). Double-dip taxes in a year and you save $4300 over standard deduction (with no savings in non-itemized years over or above the standard deduction).

The only warning on double dipping especially when income/deductions climb is possibly running into AMT. Also 140k gross even with the standard deduction is at the mid point on the 25% bracket total federal income tax of 21367.50 or 15.26% effective

[Trainwreck20]

Originally Posted by Lowexpectations

The only warning on double dipping especially when income/deductions climb is possibly running into AMT. Also 140k gross even with the standard deduction is at the mid point on the 25% bracket total federal income tax of 21367.50 or 15.26% effective

Oh, there are a thousand details. If you really want to know, you have to make a spreadsheet (or two) and figure it out, along with the possible changes in cost of living. If you save $1,000 in taxes but spend $1,000 more on food, it doesn't do you much good.

The 'real' problem with doubling up on taxes is that so many mortgages force you to roll them into escrow.

[Lowexpectations]

Originally Posted by Trainwreck20

Oh, there are a thousand details. If you really want to know, you have to make a spreadsheet (or two) and figure it out, along with the possible changes in cost of living. If you save $1,000 in taxes but spend $1,000 more on food, it doesn't do you much good.

The 'real' problem with doubling up on taxes is that so many mortgages force you to roll them into escrow.

I've noticed lenders tend to allow you to take care of it on your own if you put 20% or more down when you originate the loan

[TexasRedneck]

I've noticed it doesn't matter if you've paid your mortgage OFF.

Seriously....."getting money back" on interest - it's a oxymoron. In the 240k note example - $9600 in interest....even at the 25% tax bracket, I'm paying (rounding up) $2500/year more in income tax...... 9600-2500 = $7100 a year more in MY pocket.

I *like* that number. It also allowed me to retire early.....yay!

[Trainwreck20]

Originally Posted by Lowexpectations

I've noticed lenders tend to allow you to take care of it on your own if you put 20% or more down when you originate the loan

My last mortgage was originated almost 15 years ago, but since then my understanding is that the mortgage company charges a higher interest rate or points up front to allow you to not escrow taxes. My understanding is that the mortgage companies were left holding the unpaid tax bills on homes they foreclosed on, so they want to avoid that as much as possible

[Seymour_Butts]

H'ton,

Regarding preferring to rent due to property taxes being high:


Where do you find landlords who don't factor property taxes into the amount they charge for rent? I gotta find one.

[unihills]

Originally Posted by Seymour_Butts

H'ton,

Regarding preferring to rent due to property taxes being high:


Where do you find landlords who don't factor property taxes into the amount they charge for rent? I gotta find one.

Why would you expect to find a landlord that doesn't factor in all of their costs? Maintenance, repairs and taxes are all part of the landlord's costs and it seems reasonable they should be covered by the rent.