Every citizen dreads it! Taxes, taxes, and more taxes. There are taxes for everything. Next thing you know, they’ll be taxing the pens that you buy (and they do through sales tax at the office supplies store). One challenge every homeowner has to deal with is property taxes. If you’re feeling the financial aches and pains, then it may be because you chose the wrong state to buy a home. We’re going to talk about five of the worst states for property taxes. If you are in one of them, we advise you to pack your bags and move out!
Maybe not move out, but you should be really careful about your next financial move. You might not be aware that the taxes you are paying are higher for you than other people. Next thing you know, you are paying taxes enough for a small village and you do not have a single clue why. Do you know that cliché “location, location, location”? This definitely applies in this situation, because location may be the key to your financial misery. With this article, you can find out what are five of the worst states in America, when it comes to property taxes. (Not in general, these states are quite lovely.) But, as a homeowner, it is a tax nightmare.
Property Tax Calculations
Before getting into the details about each state, it’s important that you understand how to calculate property taxes. Property taxes take two main factors into consideration: (1) the property’s value based on assessment and (2) the official tax rate. It’s important to note that since state tax rates differ, a person in one state may end up paying $10,000 for a home worth only $150,000. While a person in another state can pay the same amount of taxes and have a home worth $1 million.
The two factors define the amount of property taxes that you will pay. To determine property value, your property will need to be assessed to determine its value. (We are talking, in terms of taxes, and not its scenic view or your nice next door neighbor. This is an official state assessment and not a review on AirBnB.)
It is important to note that anything that you do to the property that adds value to it will increase the taxes. For example, if you add an extra floor to your house, you will most definitely be paying higher property taxes. As much as an extra floor or a swimming pool sounds enticing and jacks up the price for a buyer, the property taxes might take you down a notch. (Seabury)
What are Five of the Worst States in America for Property Taxes and Why?
You are more or less stuck in the state you are living in. Not everyone has the luxury to pack their bags and move to another state. This is why you should keep in mind where you should go, if you get the chance to move to another state. (In this case, we are warning you of the states you should not go to.) Five of the worst states in the United States for property taxes are both surprising and expected. (Some of them are pretty self-explanatory, others come as a shock.) These five states are: New Jersey, Illinois, Connecticut, New York, and Vermont.
According to The Chicago Tribune, these five states are among the top ten worst states in America. These five states are considered as the most expensive states, when it comes to taxes. Taxes are specific fees that governments impose on individuals and corporations. This applies to all states on all aspects, from income to capital gains. Taxes are involuntary financial obligations that are required from all citizens in the state, without the exchange of a good or service. (But, you will also need to pay taxes on services and goods.) (Kane)
Wait, Why are They The Worst?
Whether you are a homeowner or a regular renter Joe, you are going to have a lot of issues. (Especially if you are a homeowner.) You will need to keep in mind the taxes that are included in all of the purchases you make. This includes any property that you bought, or any property that you are planning to buy. Five of the worst in America for property taxes are: Illinois, New Jersey, Connecticut, New York State, and Vermont. If you are planning on moving, you should read this article. But, if you already live there, then you should consider changing your budget plan.
Illinois: the Prairie State
Being the home state of Chicago, Illinois has the second-highest property taxes in the country, and some experts consider it to be the worst state to live in for middle-class American families. This is because of all the other taxes that have to be paid. Homeowners who have a $300,000 residential property will end up paying $6,495 per year, with the median property tax rate of $2,165 for a home value of $100,000.
The state income tax was 5% in 2015 and sharply declined to 3.75%. As for the average state and local sales tax, it is about 8.64%. This is considered the 7th highest tax rate in the United States. Unfortunately, taxes on pretty much everything in the Prairie State is high, and we mean everything. There is a possibility that it will go higher, since lawmakers are trying to deal with the largest state budget deficit in the United States. (That’s not a good sign, so you should stay on your toes.) Unlike New Jersey, the Prairie State does include taxes on food and prescription\nonprescription drugs at 1%. (Looks like you will have to pay a little extra on those French fries and Ibuprofen.) (Biechele Royce Advisors)
New Jersey: The Garden State
Oh boy! If you’re living in New Jersey, you are not a happy camper as a homeowner. The Garden State is known to have the highest property taxes in the nation. Owning a $300,000 home could mean that you could end up paying a total of $7,251 in property taxes. Now imagine what it could be like owning a property over the half-million mark.
The Garden State offers its residents a breather when it comes to income taxes. But, homeowners do not share the same luxury. The state income tax is worth 1.4%, if your income is up to $20,000. In the case that your income is more than $500,000, then you will be required to pay a state income tax of 8.97%. As for the average states and local sales tax, you could find it reaching approximately 6.97%. However, you will find that there are products that are excluded from the 7% state sales tax that excludes some purchases you make and products. (6.97%, if you want to be accurate about it.) Local sales taxes in New Jersey do not include: food, clothes, footwear, prescription and nonprescription drugs. (Thank heaven for that.) You would not want to be a homeowner and also pay taxes for French fries. (Biechele Royce Advisors)
Connecticut: The Constitution State
You’ve got to have a happy bank account to live in Connecticut. The Constitution State has one of the country’s highest property taxes (ranked by some as the third-highest). This means that homeowners can pay up to $6,417 per year for properties valued at $300,000. Those living in high-end areas of the state, such as Fairfield Country, may also end up paying $10,000 annually. Of course, the state itself is very beautiful and there are lots of nice properties, but in the end, you can get more for your money somewhere else. (If you do not have the luxury of moving somewhere else, then you should consider giving up your dream of buying a property for now.)
The state income tax in the Constitution State is 3% for individuals with an income up to $10,000, or couples with an income up to $20,000. For individuals with income more than $500,000 or a couple with income more than $1 million, the state income tax is worth 6.99%. However, on the bright side, there are no local sales taxes. On the not-so-bright side, you will still need to pay state sales taxes worth 6.35%, which is imposed on most of your purchases. (We suggest you do not buy anything fancy in the Constitution State; you do not need more on your plate.) (Biechele Royce Advisors)
New York State: The Empire State
The Big Apple has a bad reputation for a reason, and that would be taxes. New York State might be beautiful and full of wonder, but the taxes that come with it could take ten or twenty years off your life. The bad thing about New York State is not only the property taxes. It has the highest combined property, sales, and income tax in the country, making it one of the most expensive states to live in. For a property worth $300,000, you’d have to pay $5,076. But in places like West-Chester County, they might even force you to fork over $10,000 annually as a homeowner. You also need to take into consideration that home insurance costs are high, as well.
The state income tax for each individual that has an income up to approximately $8,500 is 4.0%, and for joint individuals who have income up to $17,100. Additionally, the average state and local sales tax is 8.49%. But, food and prescription\nonprescription drugs are exempt from taxes. Also, memberships, green fees, and entertainment ticket stubs are exempted from taxes. (So, you can go somewhere fun, but you cannot own it. That does not sound so bad.) (Biechele Royce Advisors)
Vermont: The Green Mountain State
If you’re seeking to own a home in Vermont, all you should know is that the state is far from ideal. With a median property tax rate of $3,797 per $214,600 of real estate value, you can end up paying a lot of money every year for a property that’s only worth $200,000. As a place to live, the Green Mountain State is not considered budget-friendly for middle-class families. This is because of its high-income tax and sales taxes. Property taxes in the state are higher than the national average. So get a map and hit the road! (Biechele Royce Advisors)
The state income tax is worth 3.55% for each individual that has an income source worth $39,900, or a couple with an income source worth $69,900. For those who make more than approximately $415,000, you will need to pay taxes worth 8.95%. The average state and local sales tax is 6.17%, which exempts food, clothing, and prescription\nonprescription drugs. However, sales taxes do not exclude soft drinks and soda are not excluded from sales tax, while alcoholic beverages served in restaurants are 10%. (It sucks, but this is not the olden days, you cannot buy a soda pop with your loose change anymore.)
Taxes are a nightmare and everyone hates dealing with it, without exception. But, imagine dealing with taxes and finding out that you are paying more than other states? Imagine if you are paying more taxes because of your state, but other states might be paying half of your taxes? It is not pretty and this revelation could break your spirit. (Or cause you to consider moving away.)
Before you decide to pack a bag, you should know the states you should avoid, if you are financially struggling. Five of the worst states in America for property taxes, or taxes in general, may come as a surprise to you. (You might be reading this and living there, right now!) The five worst states are: Illinois, New Jersey, Connecticut, New York State, and Vermont. (The Big Apple and Vermont were not really that surprising, since they are property gems.)
If you live there, then you should consider changing your lifestyle and your budget. (Or, you can just move. Whatever floats your boat.)
Biechele Royce Advisors. 10 WORST STATES TO LIVE IN FOR TAXES. 17 08 2021 <https://www.biechele-royce.com/wealth-management-blog/10-worst-states-to-live-in-for-taxes>.
Kane, Holly. States with the highest and lowest tax rates. 21 04 2021. 17 08 2021 <https://www.chicagotribune.com/business/careers-finance/sns-best-worst-states-highest-taxes-income-real-estate-sales-20210414-uf3szpo2ivbmbcjp5ezhuqwffq-photogallery.html>.
Seabury, Chris. How Property Taxes Are Calculated. 01 01 2021. 17 08 2021 <https://www.investopedia.com/articles/tax/09/calculate-property-tax.asp>.