Are rising property taxes and the cap on the ability to deduct property taxes on our federal tax returns going to hurt real estate sales?
Unfortunately, the changes in the federal tax laws may already be impacting our housing market – the higher end market, most impacted by the $10,000 cap on the deductibility of taxes, has shown noticeable slowing over last year. Rising tax millage rates are only going to exacerbate the problem, but rising costs have long been a reality of the world we live in and are to be expected.
What we need is a mindset shift, which will be slow in coming. We all need to step back and look at our tax package as a whole. Pennsylvania is a comparatively low taxing state when it comes to income tax. Our state income tax rate is only 3.07% — this is impressively low when compared to many other states (note our neighbors in New York at 8.82%, West Virginia at 6.5% and Ohio at 4.997%, and the top taxing state of CA at 13.3%). What we are saving in income tax, we are paying in part in property taxes and this needs to be kept in perspective before making bold statements about how much property tax one will or will not pay. Additionally, the $10,000 cap on deductibility of taxes as a cap on the combined sum of property and income taxes, so those in higher income tax states will be hit much harder by this. We really do still have it pretty good in PA!
When considering property taxes, rather than focusing on what one is not getting, buyers would be well advised to think about what you are getting. On a $500,000 assessment, the taxes in Sewickley borough would be approximately $41/day. On a million dollar assessment, they would be approximately $82/day. Compare this to the cost of hotels that you stay in on vacation! If you enjoy coming home everyday to a home that feels inviting and relaxing to you, if it is a home that your family thrives in and that provides shelter and sanctuary that you love, that seems like a small price to pay, even without the tax breaks. There is a cost to living – the food we eat (a dinner out can cost more than the daily property tax rate), the gas we burn to heat our homes in these unseasonable chilly Aprils, the cell phone bills to stay in touch with family and friends. Property taxes are just another one of those costs of living. I think it will be a long time (if ever) before we see that tax break return. Reframing our thinking about property taxes, keeping in mind the otherwise low taxing state we live in and the intangible benefits that you and your family receive from living in a home that you love, is my recommended course of action!
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Sewickley, PA 15143
Office: 412-741-2200 x238