Is it still worth buying a house in a state with insane property taxes

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bigred77
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Re: Is it still worth buying a house in a state with insane property taxes

Post by bigred77 » Fri Jul 21, 2017 11:22 am

alfaspider wrote:
tigermilk wrote:
hookemhorns wrote:Try living in Texas where property taxes in Dallas are 2.75% of "assessed" value, which is pretty much pulled out of thin air but always increases by mid to high single digits every year.
What are you complaining for? Only 2.75%? That's nothing. I'm sitting at 3.1% here south of Houston...
Move 30 minutes north and you can get down to 2.5 :happy

At least we don't have state income tax on top of those taxes. I moved from NYC, and my state & local tax burden was about 30% higher overall even without owning a home- it would have been even worse had I owned there. My only real gripe is the silly game you have to play with assessments. Every year, they try to increase my assessment by the maximum allowed 10% (even though there's no way my home actually appreciated by that much). Every year, I protest and they back down to no or minimal increase. It would be much nicer I didn't have to make the annual schlep down to the tax assessor's office. I suppose they do it because there are people who don't know any better and just pay up.
I make the same trip every year to protest and they always reduce it back down again to no or nominal gains.

I am SHOCKED at how few people are willing to do this. In my neighborhood there is 1 other person who does it like I do annually. And they all know about it, I've told most of them myself. Everyone else just can't be bothered.

avalpert
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Re: Is it still worth buying a house in a state with insane property taxes

Post by avalpert » Fri Jul 21, 2017 11:28 am

If a few thousand dollars in property taxes is what moves the purchase from being worth it to not worth than it was probably too marginal a benefit to take on the risks of ownership anyway.

pshonore
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Re: Is it still worth buying a house in a state with insane property taxes

Post by pshonore » Fri Jul 21, 2017 11:29 am

lazydavid wrote:
Watty wrote:One thing to keep in mind is that you not only have to pay the property taxes now but also into retirement. Having an extra $10,000 a year in retirement will require something in the ballpark of $250,000 in extra retirement savings to generate the needed income using the 4% safe withdrawal rate guideline.
The flipside of that is that most sources of retirement income are exempt from income tax, and property taxes have both a senior exemption (reduces the rate vs. non-seniors) and a senior freeze exemption (locks the valuation, resulting in taxes that increase slowly or even decrease over time). So in some ways retirees are better off than workers here, despite the high taxes.
Not in CT where the only break is SS is taxed at a max of 25%. And there are property tax freezes, exemptions, etc. but all are income tested and the limits are low. Also remember that places where property taxes are high either have no income tax (like TX) or high per capita incomes (like CT, NY, NJ etc)

CppCoder
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Re: Is it still worth buying a house in a state with insane property taxes

Post by CppCoder » Fri Jul 21, 2017 11:36 am

Meg77 wrote: Then move! I don't know what you do, but I can't think of many jobs that only exist in Chicago.
Maybe he plays for the Cubs, and the only trade he's been offered is to the White Sox :).

El Jefe
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Re: Is it still worth buying a house in a state with insane property taxes

Post by El Jefe » Fri Jul 21, 2017 11:46 am

As others noted: "You get what you pay for."

We live in the city of Chicago. Yes, we pay high property taxes. But our taxes fund great parks, cultural events, public transportation access (saves us a car payment), public safety, and the beautiful lakefront. We are able to live in one of the world's best cities. Most of these amenities are free to use. Even if our property taxes doubled or tripled I would still see a lot of value in what we pay.

We do not have children. I could see how high property taxes, weak public schools, and high property prices (for the Midwest) could lead someone to conclude Chicago was not best for their family. That said, nowhere is perfect.

Everyone everywhere needs to weigh pros and cons. What you pay, and what you get for it.

We spent a long time (probably too long) renting before we realized all the media cynicism about IL did not make a lick of a difference about what was best for our family.

My hard-earned advice to you: Don't waste your time worrying about politics or anything else you can't control. Life is too short for it. Ask yourself what matters most to you and your family. Maybe Chicago/Chicagoland is not the best place for you. Only you can answer.

Good luck!

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Re: Is it still worth buying a house in a state with insane property taxes

Post by rec7 » Fri Jul 21, 2017 12:51 pm

I know many people in Chicago. Some pay 15k in property taxes a year it is crazy up there. Most of the people I know live very nice up there. Here in Missouri houses and taxes are much cheaper but the people do not live as well as the Chicago folks. That is just what I see around me.
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lazydavid
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Re: Is it still worth buying a house in a state with insane property taxes

Post by lazydavid » Fri Jul 21, 2017 2:59 pm

pshonore wrote:Not in CT where the only break is SS is taxed at a max of 25%. And there are property tax freezes, exemptions, etc. but all are income tested and the limits are low. Also remember that places where property taxes are high either have no income tax (like TX) or high per capita incomes (like CT, NY, NJ etc)
We're talking about Illinois, where all retirement income is not taxed. But that aside, we have both high property taxes (2nd highest in the nation behind NJ) AND high income taxes (16th highest).

SrGrumpy
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Re: Is it still worth buying a house in a state with insane property taxes

Post by SrGrumpy » Fri Jul 21, 2017 4:00 pm

El Jefe wrote:
We live in the city of Chicago. Yes, we pay high property taxes. But our taxes fund ... public safety ...
I know Chicago's a big town and the rampant murder is fairly localized, but it's still funny to see "Chicago" and "public safety" in adjacent sentences.

My only personal experience with Chicago property taxes is watching family members in Chicago divorcing - thereby doubling their property tax bills. Sad.

sschoe2
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Re: Is it still worth buying a house in a state with insane property taxes

Post by sschoe2 » Fri Jul 21, 2017 6:16 pm

avalpert wrote:If a few thousand dollars in property taxes is what moves the purchase from being worth it to not worth than it was probably too marginal a benefit to take on the risks of ownership anyway.
If a percent or so moves the decision from active management to passive index funds it probably isn't worth taking on the risk of investing in the first place. I can't believe that was posted by a Boglehead.

We are talking perhaps >$5k year. Would anybody care to do the math as to how much money you lost over 30 years vs putting that into VTI? What it funds is corruption, inefficiency, lavish retirement for public "servants" (I say public servants with profound irony) and just overall bad government that serves itself before the people.

Buying an apartment and renting the other half out is interesting but I already have a full time job and don't think I have the time to deal with being a landlord.

I really am torn. I absolutely love my job and believe getting a comparable job in my field probably isn't likely. OTOH I hate Illinois particularly the govt.

As for the city of Chicago it is not a plus it is a minus. Crime, traffic, dealing with bad govt (the infamous parking deal and red light and speed cameras everywhere). I almost never go into the city.

avalpert
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Re: Is it still worth buying a house in a state with insane property taxes

Post by avalpert » Fri Jul 21, 2017 7:47 pm

sschoe2 wrote:
avalpert wrote:If a few thousand dollars in property taxes is what moves the purchase from being worth it to not worth than it was probably too marginal a benefit to take on the risks of ownership anyway.
If a percent or so moves the decision from active management to passive index funds it probably isn't worth taking on the risk of investing in the first place. I can't believe that was posted by a Boglehead.
It is a poor comparison - if $5,000 in expenses on a $500,000 asset that is highly volatile on its own not to mention the risk of large maintenance and repair costs is what causse you angst than it is almost certainly too marginal a value to buy over rent.

I can't believe a Boglehead doesn't recognize that.

alfaspider
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Re: Is it still worth buying a house in a state with insane property taxes

Post by alfaspider » Tue Jul 25, 2017 3:34 pm

avalpert wrote:
sschoe2 wrote:
avalpert wrote:If a few thousand dollars in property taxes is what moves the purchase from being worth it to not worth than it was probably too marginal a benefit to take on the risks of ownership anyway.
If a percent or so moves the decision from active management to passive index funds it probably isn't worth taking on the risk of investing in the first place. I can't believe that was posted by a Boglehead.
It is a poor comparison - if $5,000 in expenses on a $500,000 asset that is highly volatile on its own not to mention the risk of large maintenance and repair costs is what causse you angst than it is almost certainly too marginal a value to buy over rent.

I can't believe a Boglehead doesn't recognize that.
If you own the house for a very long time, it's possible that you could end up paying more in property taxes over than the original purchase price of the home. I'd hardly say it's a marginal consideration. In fact, my annual property taxes are already 50% of my annual mortgage payments. With inflation and home appreciation, they could easily exceed the mortgage before it is paid off.

trueblueky
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Re: Is it still worth buying a house in a state with insane property taxes

Post by trueblueky » Tue Jul 25, 2017 8:37 pm

sunny_socal wrote:No wonder people are looking to move from Chicago to San Diego:
- Terrible weather
- Insane property taxes
- Crime

It's only a matter of time before the city implodes. Don't buy there.
Caterpillar just moved its corporate HQ to Chicago area from Peoria. McDonald's moved its corporate HQ from burbs into the city. Boeing relocated there from Seattle!

Chicago has a concentration of knowledge and financial workers that some corporations need and the vibrancy that some creative millennials want.

The structural issues are real. There are too many governmental bodies, each with taxing and bond authority. When I lived in Cook County, they handed me a list: state, county, city, township, elementary school district, high school district, junior college district, park district, fire district, library district and on and on. I had grown up with city, county, school district (same boundary as the county, but different board), so all those elected officials were hard to fathom.

TBillT
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Re: Is it still worth buying a house in a state with insane property taxes

Post by TBillT » Tue Jul 25, 2017 8:49 pm

I did not immediately see someone else say these taxes are Tax Deductible as an itemized deduction.
In some ways, states are smart to boost property taxes as that means Uncle Sam has to give the residents a partial rebate due to the deduction.

McGowan
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Re: Is it still worth buying a house in a state with insane property taxes

Post by McGowan » Wed Jul 26, 2017 6:28 am

TBillT wrote:I did not immediately see someone else say these taxes are Tax Deductible as an itemized deduction.
In some ways, states are smart to boost property taxes as that means Uncle Sam has to give the residents a partial rebate due to the deduction.
Unless the ability to deduct this for Federal tax returns is taken away in upcoming tax legislation.

Bigbonds
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Re: Is it still worth buying a house in a state with insane property taxes

Post by Bigbonds » Wed Jul 26, 2017 6:58 am

I think the message Illinois is trying to tell you is that they don't respect private property rights. At 10K a year, you are never going to really own your property so much as rent it from the state to pay for government pensions. Do you really want a 10K liability hanging over your head when you retire that is bound to go up every year in the future? Illinois bonds are hardly above junk status. If they can't get money through bonds guess who they are coming after, property owners.

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Re: Is it still worth buying a house in a state with insane property taxes

Post by simplesimon » Wed Jul 26, 2017 7:46 am

trueblueky wrote:Caterpillar just moved its corporate HQ to Chicago area from Peoria. McDonald's moved its corporate HQ from burbs into the city. Boeing relocated there from Seattle!

Chicago has a concentration of knowledge and financial workers that some corporations need and the vibrancy that some creative millennials want.
Were any tax breaks given?

TBillT
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Re: Is it still worth buying a house in a state with insane property taxes

Post by TBillT » Wed Jul 26, 2017 9:23 am

McGowan wrote:
TBillT wrote:I did not immediately see someone else say these taxes are Tax Deductible as an itemized deduction.
In some ways, states are smart to boost property taxes as that means Uncle Sam has to give the residents a partial rebate due to the deduction.
Unless the ability to deduct this for Federal tax returns is taken away in upcoming tax legislation.
I know I know but that is forbidden topic of tax changes.
(Were that to happen we can revisit if buying a house makes financial sense)

FoolMeOnce
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Re: Is it still worth buying a house in a state with insane property taxes

Post by FoolMeOnce » Wed Jul 26, 2017 10:16 am

sschoe2 wrote:Taxes on even a modest home can be $10k per year.
At $10k per year in Chicago, the house would be around $800k. Perhaps this is the suburbs, which I believe generally have higher tax burdens than Cook County. If you are looking out in a collar county, come on in closer!

livefreefam
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Re: Is it still worth buying a house in a state with insane property taxes

Post by livefreefam » Wed Jul 26, 2017 10:45 am

abner kravitz wrote:
lazydavid wrote: On a sidenote, is it sad that, having written my 2nd installment property tax check yesterday, I knew this thread was about Illinois before opening it?
Funny, I guessed New Jersey. Just as bad, if not worse.
They tend to be two of the worst, I'd say IL now takes the cake after that brilliant move to raise income taxes by 32%.

Admiral
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Re: Is it still worth buying a house in a state with insane property taxes

Post by Admiral » Wed Jul 26, 2017 2:02 pm

My take:

Taxes go up. But so do rents. As housing prices increase, rents increase to keep pace. On the bright side, your salary is also likely to go up, and hopefully at a greater rate than your taxes. At least with a mortgage, you have fixed costs (aside from tax increases) for 30 years, and your money is at least going to something you can sell. Inflation alone will make the house cheaper than renting, unless you're not comparing equivalent-size places. (As KlangFool always says, you can't compare a one bedroom apt to a house.)

Now, that said, many people are willing to pay $10-20k (think Westchester, or Connecticut) for good schools. If you don't have kids--or the schools are not good--then perhaps look to relocate if your job is portable.

We'd need to see some data on house vs apt prices (of the same size) to make a true determination, but--while I don't like paying taxes--I do like that my dwelling is something I will own. And I own more of it every day (month).

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Re: Is it still worth buying a house in a state with insane property taxes

Post by JBTX » Wed Jul 26, 2017 3:25 pm

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Last edited by JBTX on Mon Aug 06, 2018 9:36 pm, edited 2 times in total.

alfaspider
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Re: Is it still worth buying a house in a state with insane property taxes

Post by alfaspider » Thu Jul 27, 2017 7:50 am

JBTX wrote:
alfaspider wrote:
tigermilk wrote:
hookemhorns wrote:Try living in Texas where property taxes in Dallas are 2.75% of "assessed" value, which is pretty much pulled out of thin air but always increases by mid to high single digits every year.
What are you complaining for? Only 2.75%? That's nothing. I'm sitting at 3.1% here south of Houston...
Move 30 minutes north and you can get down to 2.5 :happy

At least we don't have state income tax on top of those taxes. I moved from NYC, and my state & local tax burden was about 30% higher overall even without owning a home- it would have been even worse had I owned there. My only real gripe is the silly game you have to play with assessments. Every year, they try to increase my assessment by the maximum allowed 10% (even though there's no way my home actually appreciated by that much). Every year, I protest and they back down to no or minimal increase. It would be much nicer I didn't have to make the annual schlep down to the tax assessor's office. I suppose they do it because there are people who don't know any better and just pay up.
I live in north DFW area and ours run somewhere between 2.5 and 2.8. Don't exactly remember. Every couple of years I protest the increase and get a modest concession. Marginal it is even worth my time. I don't complain a lot with no income tax. Property tax rates are high but property values are low compared to most major urban areas. Also sales taxes high at 8.25%. But again I'll take all that in exchange for no income tax.
True, but values are creeping up in central Texas cities. We aren't quite to California levels yet, but me neighbor is listing a house just a touch over 2k sq feet for close to $1 million :shock:

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Re: Is it still worth buying a house in a state with insane property taxes

Post by sschoe2 » Thu Jul 27, 2017 8:57 am

FoolMeOnce wrote:
sschoe2 wrote:Taxes on even a modest home can be $10k per year.
At $10k per year in Chicago, the house would be around $800k. Perhaps this is the suburbs, which I believe generally have higher tax burdens than Cook County. If you are looking out in a collar county, come on in closer!
Chicago itself does indeed have lower property tax rates than the collar counties. I currently commute from the near north suburbs (Cook) to the west suburbs (Dupage) via tollway. The trouble with the west suburbs is the only desirable parts of Chicago (mostly northside or adjacent to the loop) would be a horrendous commute on I-290 and surface streets or Lake Shore Drive/Kennedy (which is even worse). I recently had a coworker quit simply over the commute because she couldn't stand the commute from the north side anymore.The west side of Chicago is not a place anyone would want to live even though the city itself has lower tax rates of the suburbs. Also frankly the city has nothing for me and I would not want to live there. I'd want to live closer to work or further away from the city.

My relative currently pays about $8k on a house worth probably $325k naturally the county claims much higher and that is only with some senior and homestead exemptions. The effective rates are 2.5% minimum to 4% in much of the area and rising though the formula for calculating tax is very convoluted purposely to make appealing and understanding it more difficult (like old phone bills).

http://www.chicagotribune.com/ct-compar ... story.html

Bottom line in a state where the govt acts more like a crime syndicate that taxes people out of their homes for the benefit of the people in the govt I just feel my best option is to minimize the amount of property that the govt can tax me on and maintain flexibility so that I can leave and not expose myself to what I think is going to be a bad long term investment (residential real-estate in Illinois).

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Re: Is it still worth buying a house in a state with insane property taxes

Post by lazydavid » Thu Jul 27, 2017 9:27 am

FoolMeOnce wrote:
sschoe2 wrote:Taxes on even a modest home can be $10k per year.
At $10k per year in Chicago, the house would be around $800k. Perhaps this is the suburbs, which I believe generally have higher tax burdens than Cook County. If you are looking out in a collar county, come on in closer!
I'm in Cook County, in one of the suburbs with the lowest comparative tax burden (Schaumburg) due to a huge commercial base, and my taxes are $9,200/year for a house I paid $420k for 4 years ago. This is in line with what you see in the city:
As a result, the owner of a city home determined to be worth $224,500 will pay nearly $4,000 in property taxes this year — an increase of about $363.
Source: http://www.chicagotribune.com/news/loca ... story.html

Your $10k/$800k is way out of touch with reality. This calculator suggests that the bill for an $800k house in Chicago should be around $16k.

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teacher
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Re: Is it still worth buying a house in a state with insane property taxes

Post by teacher » Thu Jul 27, 2017 10:10 am

Landlords have to pay property taxes on rentals, so I would think the cost of "insane property taxes" is baked into the rent.

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Re: Is it still worth buying a house in a state with insane property taxes

Post by Valuethinker » Thu Jul 27, 2017 10:52 am

sschoe2 wrote:The title kind of says it all. I currently rent from family in Illinois who I help take care of. The taxes here seem so out of control and insane that it seems to me as not to be worth it to purchase a home here. Taxes on even a modest home can be $10k per year in addition to mortgage interest, maintenance, insurance, and other associated fees as well as the possibility that the taxes result in poor growth of value of the house and the local economy.

I rather just get an apartment possibly with a room mate to lesson the tax burden and yes I've seriously thought about leaving the state but finding a comparable job is not likely for myself. What is everyone else's take?
Until there is some stability on the state's fiscal position, a signalled willingness by all sides to address the known issues that are arising, I would be very careful re buying a property.

I do not see any hurry to buy a property in that state, particularly as it is not your long term goal to live there (e.g. post retirement).

The long run return for home ownership in the USA has, amazingly, barely beaten inflation. I say amazingly because of course the US population and GDP per capita still rise over time. And because there are glaring counterexamples: primarily certain coastal centres - LA & Socal, SF Bay area, Portland, Seattle, Boston, NYC, Washington DC.

But generally, housing is a poor investment compared simply to owning a broadly diversified portfolio of index funds.

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Titanium3er
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Re: Is it still worth buying a house in a state with insane property taxes

Post by Titanium3er » Thu Jul 27, 2017 10:59 am

This is a tough question to give general answers to. You provide some hints as to your circumstances (marital status, children, occupation, etc.) and the factors you consider important, but a lot has to be assumed.

In my case, I moved from a HCOL/high property tax location (Northern NJ) to what I would consider at the time to have been a LCOL/low-medium property tax area (Southwest FL). I had no kids at that point so didn't consider things like quality schools, tight-knit communities, and access to diverse experiences (food, terrain, outdoor activities, arts/culture, interesting people with which to interact, etc.). In the beginning, life was great as I was able to afford what I considered to be a better quality of life. When I had kids though, I started to consider not only those things I already mentioned, but also things like career advancement potential and wage differences.

What made the decision to move back easier for me was that the lower COL place I had moved to was no longer appreciably lower cost due to real estate prices spiking. What was still considerably lower were the property taxes. There are a few reasons for this, but one of them is Florida's homestead laws which cap the rate of increases. What I found, though, is that in my case when I considered other home costs like HOA's (almost universal in that area), flood insurance (ditto), and more expensive homeowner's insurance (due to hurricane risk), the difference was nearly non-existant.

I'm sure that the factors I considered are not exactly the same as those you think are important. If your level of income is closely tied to the high property tax area as you stated, that may be a tough hurdle to overcome.

e5116
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Re: Is it still worth buying a house in a state with insane property taxes

Post by e5116 » Thu Jul 27, 2017 11:05 am

High property taxes also put downward pressure on prices, so you're paying it one way or the other. Without high property taxes, the sale price would likely be increased. At least with property taxes you get a deduction at the end of the year....But, on the downside, once you "own" the house outright, you still might have to pay $1k+/month in taxes. :twisted: But yeah, you're paying it either way if you're buying or renting. I live just north of Chicago and while there are absolutely huge financial issues with the city and state, for the amenities Chicago provides, it's hard to find a place that gives better bang for your buck. (And I do pay an "insane" property taxes ... north of $12k for a property assessed around $500k). Major east coast cities are way more expensive, though, and don't even talk to me about California from a cost perspective. The "terrible" weather and "horrible" crime are completely overstated in my opinion. It has been pleasantly in the 70s and 80s for the last two months. The violence is extremely localized to particular neighborhoods, and the winters have actually been very mild lately (although I guess they can turn back....I'm not saying Chicago winters are awesome, but it's not Canada either).

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Re: Is it still worth buying a house in a state with insane property taxes

Post by steelerfan » Thu Jul 27, 2017 11:20 am

Ron Ronnerson wrote:There isn't enough information to properly answer your question. Do you have enough saved for a down payment? Are you interested in being a home owner? Do you plan to stay in the area for the long term? How much is rent for a home similar to the one you might buy? Can you afford to buy and still meet other financial goals with a sufficient cushion in your budget?

By the way, I pay $10k in property taxes on a home I purchased a few years ago and agree that's a big number to come to terms with. You have to look at the big picture and think about the long term, though. My mortgage payment, property taxes, HOA, and insurance add up to about $2600 a month (accounting for the tax deduction on the interest) on a 2150 sq. ft. home with 4 bedrooms and 4 bathrooms. In 2010, I lived in an 1100 sq. ft apartment that was 2 bedroom and 2 bathrooms. The rent on the apartment back then was $1800 a month and is $2900 a month today. I've also built a lot of equity in the meantime and my mortgage payment is fixed for the term of the loan. Also, I live in a much bigger home with better schools than where I used to rent. I'm married, have a family, and plan to live in our home for many, many years. If I were single or planning to move, I would have probably continued to rent. Lastly, I could afford the house despite the sticker shock from the property taxes. Basically, you can't just focus on the property taxes. Consider all the relevant factors.
Lot's of wisdom right there!
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teacher
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Re: Is it still worth buying a house in a state with insane property taxes

Post by teacher » Thu Jul 27, 2017 11:26 am

e5116 wrote:
....don't even talk to me about California from a cost perspective...
California's property tax structure is preferable for those who stay in their homes long term, in my opinion. Since 1979, property is taxed at 1% of assessed value, and it restricts increases in assessed value to 2% per year. The elderly and disabled are not taxed out of their homes due to increases in property taxes in California.

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Re: Is it still worth buying a house in a state with insane property taxes

Post by FoolMeOnce » Thu Jul 27, 2017 11:31 am

lazydavid wrote:
FoolMeOnce wrote:
sschoe2 wrote:Taxes on even a modest home can be $10k per year.
At $10k per year in Chicago, the house would be around $800k. Perhaps this is the suburbs, which I believe generally have higher tax burdens than Cook County. If you are looking out in a collar county, come on in closer!
I'm in Cook County, in one of the suburbs with the lowest comparative tax burden (Schaumburg) due to a huge commercial base, and my taxes are $9,200/year for a house I paid $420k for 4 years ago. This is in line with what you see in the city:

Your $10k/$800k is way out of touch with reality. This calculator suggests that the bill for an $800k house in Chicago should be around $16k.
I'm just speaking from experience. In our previous condo, we paid roughly 1.6% or 1.7% of market value and purchase/sale price. In our current house for the past few years, we've paid roughly 1.1% - 1.2% of market value and 1.35% of the purchase price. Both in Chicago.

I don't compare to assessed value because the assessment system and the calculation that spits out your tax burden is too wacky. And it makes more sense to me to weigh the cost of ownership against the liquidation value of the asset (though, yes, ignoring closing/moving costs).

sschoe2 wrote:Also frankly the city has nothing for me and I would not want to live there. I'd want to live closer to work or further away from the city...

Bottom line in a state where the govt acts more like a crime syndicate that taxes people out of their homes for the benefit of the people in the govt I just feel my best option is to minimize the amount of property that the govt can tax me on and maintain flexibility so that I can leave and not expose myself to what I think is going to be a bad long term investment (residential real-estate in Illinois).
Sounds like you've answered your own question!

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Re: Is it still worth buying a house in a state with insane property taxes

Post by sschoe2 » Thu Jul 27, 2017 11:36 am

Titanium3er wrote:This is a tough question to give general answers to. You provide some hints as to your circumstances (marital status, children, occupation, etc.) and the factors you consider important, but a lot has to be assumed.
single
no children nor plans to have any
occupation: Analytical Chemist in specialized field most jobs I've seen even in HCOL areas pay a lot less than I am making now.
financial status could easily afford down payment on a house. Net worth ~ $325k
dislike large cities. I'd live in a rural/semirural area if I could get a job there.
Would not consider a condo or any property with an "association." Do not trust them at all and won't voluntarily pay someone money to boss me arround what I can do with my property. At least with renting you can bolt if landlord suffers from cranial rectal inversion.

sschoe2
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Re: Is it still worth buying a house in a state with insane property taxes

Post by sschoe2 » Thu Jul 27, 2017 11:43 am

FoolMeOnce wrote:
sschoe2 wrote:Also frankly the city has nothing for me and I would not want to live there. I'd want to live closer to work or further away from the city...

Bottom line in a state where the govt acts more like a crime syndicate that taxes people out of their homes for the benefit of the people in the govt I just feel my best option is to minimize the amount of property that the govt can tax me on and maintain flexibility so that I can leave and not expose myself to what I think is going to be a bad long term investment (residential real-estate in Illinois).
Sounds like you've answered your own question!
That is how I feel from an emotional point of view. Right now especially I am heavily influenced by my absolute violent hatred for the govt in Illinois. I just want to ensure I am not doing something foolish financially due to my emotions.

e5116
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Re: Is it still worth buying a house in a state with insane property taxes

Post by e5116 » Thu Jul 27, 2017 12:00 pm

teacher wrote:e5116 wrote:
....don't even talk to me about California from a cost perspective...
California's property tax structure is preferable for those who stay in their homes long term, in my opinion. Since 1979, property is taxed at 1% of assessed value, and it restricts increases in assessed value to 2% per year. The elderly and disabled are not taxed out of their homes due to increases in property taxes in California.
Sorry, I wasn't clear. Wasn't talking about property taxes in CA, just general COL of Chicago vs. major cities in California. But yes, those that have been in their homes for a long time aren't burdened with large taxes in CA (which is why I hear people keep homes in the family there as much as possible which may artificially deflate the amount of inventory...but that's another topic of unintended consequences of tax policy).

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Re: Is it still worth buying a house in a state with insane property taxes

Post by Valuethinker » Thu Jul 27, 2017 12:24 pm

sschoe2 wrote:
FoolMeOnce wrote:
sschoe2 wrote:Also frankly the city has nothing for me and I would not want to live there. I'd want to live closer to work or further away from the city...

Bottom line in a state where the govt acts more like a crime syndicate that taxes people out of their homes for the benefit of the people in the govt I just feel my best option is to minimize the amount of property that the govt can tax me on and maintain flexibility so that I can leave and not expose myself to what I think is going to be a bad long term investment (residential real-estate in Illinois).
Sounds like you've answered your own question!
That is how I feel from an emotional point of view. Right now especially I am heavily influenced by my absolute violent hatred for the govt in Illinois. I just want to ensure I am not doing something foolish financially due to my emotions.
Generally the problem is people feel they "must" own a home.

But the very long term data in the US (and other countries) suggests that is not the case. Who knows what the future will bring, but virtual reality, autonomous vehicles etc. open up the possibility of urban centres sprawling even further, because time spent in traffic commuting will be less of a burden.

Houses are just not a very good investment-- with the exception of certain coastal US centers, where housing prices have shot way ahead of anything else. That seems to be about the strength of local industries (finance in NY/ Boston, tech in Seattle & SF etc.) and zoning controls (NIMBY).

So your analysis is right separate from your feelings about Illinois' government. Push appears to be coming to shove in terms of Illinois future fiscal obligations-- see downgrading by the rating agencies. After Detroit and Puerto Rico, it must be clear that the worst can happen, is not just a theoretical possibility. Such a crisis may be necessary to lead to the sort of compromises that need to be made.

I hope the above doesn't get too much onto the Illinois govt & politics. I don't live in the USA, and only know it through the financial press.

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Re: Is it still worth buying a house in a state with insane property taxes

Post by JBTX » Thu Jul 27, 2017 3:44 pm

alfaspider wrote:
JBTX wrote:
alfaspider wrote:
tigermilk wrote:
hookemhorns wrote:Try living in Texas where property taxes in Dallas are 2.75% of "assessed" value, which is pretty much pulled out of thin air but always increases by mid to high single digits every year.
What are you complaining for? Only 2.75%? That's nothing. I'm sitting at 3.1% here south of Houston...
Move 30 minutes north and you can get down to 2.5 :happy

At least we don't have state income tax on top of those taxes. I moved from NYC, and my state & local tax burden was about 30% higher overall even without owning a home- it would have been even worse had I owned there. My only real gripe is the silly game you have to play with assessments. Every year, they try to increase my assessment by the maximum allowed 10% (even though there's no way my home actually appreciated by that much). Every year, I protest and they back down to no or minimal increase. It would be much nicer I didn't have to make the annual schlep down to the tax assessor's office. I suppose they do it because there are people who don't know any better and just pay up.
I live in north DFW area and ours run somewhere between 2.5 and 2.8. Don't exactly remember. Every couple of years I protest the increase and get a modest concession. Marginal it is even worth my time. I don't complain a lot with no income tax. Property tax rates are high but property values are low compared to most major urban areas. Also sales taxes high at 8.25%. But again I'll take all that in exchange for no income tax.
True, but values are creeping up in central Texas cities. We aren't quite to California levels yet, but me neighbor is listing a house just a touch over 2k sq feet for close to $1 million :shock:
Depends on where you are. Maybe in highland park. We live about 30 miles north of downtown Dallas and a 2500 sq ft home runs around $300k.

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Re: Is it still worth buying a house in a state with insane property taxes

Post by MoldyCheese » Fri Jul 28, 2017 6:40 am

I feel this is relevant to my wife and I who currently renting in Illinois. As someone else here mentioned the current tax hike does nothing to address the underlying financial issues within the state and there are multiple layers of government here that are severely underfunded and in bad fiscal shape. The recent tax hike didn't even address the entire $15(?) billion of backlogged bills, instead it essentially allowed the state to borrow additional money to pay off about half of that past debt. Throw in Chicago's financial trouble, CPS, police pension fund, fire pension fund, county, etc... and it's eye opening on how big of a mess it truly is.

A recent article in the tribune did a study and outside of the loop/near loop and Lake View + Lincoln Park the state's real estate hasn't even recovered from the crash last decade. Sometimes I have to remind myself of that to put things into perspective that buying is not always a sure thing. The news always likes to talk about rising real estate values in places like silicon valley, but what about areas where the best you can hope for is not selling for less than you paid? While I admit we don't have kids yet we've opted to continue renting for at least the next 2 years to see what shakes out in the government. Taxes will increase, they simply have to, but by how much and in what way?

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Re: Is it still worth buying a house in a state with insane property taxes

Post by VINNY » Fri Jul 28, 2017 8:39 am

I feel your frustration! I work and live in Cook County. I have no desire to be near or around the downtown area due to congestion, crime and the high cost of parking in order to do anything in the city.

The government pensions and benefits are out of control, giving the state an insatiable appetite for more and more revenue on the hard working back of SOME of the taxpayers.

I would read JLCollins piece on renting versus buying. He has a blog called "The simple path to wealth" and makes a compelling case on why renting can be more advantageous than buying.

Either rent a very affordable place or buy a home that has taxes in the range your looking for. Sometimes, that means an older home in need of TLC. We have thought of moving to a bigger home but the taxes on a bigger home have stopped us from doing so. It's such a joke, you never truly own your home, in Cook County your leasing it from the School District.

In nearby Indiana, (St. John) similar homes that we were looking to buy in Cook County, have property taxes that are 1/3 to 1/2 what I'd pay in Cook County. I'd lean towards to renting a small space that will work for you, and invest the difference. Or, buy an older home with stable taxes.

Welcome to Illinois, embrace the suck because it just does. However, you can fight back by saving a boatload of money 50% and higher, become financially independent and someday leave this state in your rear view mirror.

I happened to buy an older home and fixed it up to our liking. My taxes are now $6,000.00 per year on a home that ought to really be around $3,000 to $4,000.00 a year. If you do the same and keep your housing costs low, that will enable you to save the difference. That's what we did and it worked out great. Forget the homes with property taxes of 10K!

And don't make the same mistake many of my co-workers made. Years ago they fled to areas that were just starting to boom like Plainfield and Shorewood because of low property taxes. Their taxes have since spiked due to the influx of people and need for more schools, leaving them worse off. Long commutes, 45 minutes plus and high property taxes. Good Luck!

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Re: Is it still worth buying a house in a state with insane property taxes

Post by jharkin » Fri Jul 28, 2017 9:09 am

I didn't read the entire thread yet...


Skimming I gathered that this is Illinois. A google search shows that they seem to have average property tax rates over $26/thousand. Ok that's high, but we need to know:

1- How is the rest of the tax burden in the state?
Are your income taxes, sales taxes, gas taxes, etc high, medium, low? Many states with high property taxes use that to offset low or now income/sales tax. The important part is the overall tax burden.

2- What do you get for it?
I live in Massachusetts and my property taxes are high but not as bad as you ($18?/thousand I think). But we have only average sales tax and slightly below average income tax which balances it out to put our total tax burden just middle of the road nationally. And for that tax burden I get some of the lowest crime rates, best rated primary schools and healthcare in the nation, world class Universities and teaching hospitals, plus a booming technology job economy in Metro Boston. I think its a fair trade.

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Re: Is it still worth buying a house in a state with insane property taxes

Post by lazydavid » Fri Jul 28, 2017 10:14 am

jharkin wrote:I didn't read the entire thread yet...


Skimming I gathered that this is Illinois. A google search shows that they seem to have average property tax rates over $26/thousand. Ok that's high, but we need to know:

1- How is the rest of the tax burden in the state?
Are your income taxes, sales taxes, gas taxes, etc high, medium, low? Many states with high property taxes use that to offset low or now income/sales tax. The important part is the overall tax burden.
Overall tax burden is very high:
-2nd highest property taxes in the nation
-16th highest income taxes (5% flat) in the nation
-highest sales tax of any major city in the nation (10.25% in Chicago)
-7th highest statewide average sales tax (8.64%)
-12th highest gasoline tax (34.01 cents/gallon excluding federal portion)
jharkin wrote:2- What do you get for it?
I live in Massachusetts and my property taxes are high but not as bad as you ($18?/thousand I think). But we have only average sales tax and slightly below average income tax which balances it out to put our total tax burden just middle of the road nationally. And for that tax burden I get some of the lowest crime rates, best rated primary schools and healthcare in the nation, world class Universities and teaching hospitals, plus a booming technology job economy in Metro Boston. I think its a fair trade.
Statewide crime rates are pretty close to average, but the city of Chicago is among the worst in the country, crime-wise. Many suburban school districts (including mine) are excellent--Illinois is home to 5 of the top 25 school districts in the nation, including #4. CPS is not so good except for the magnet/charter schools. State university system is very good (#18 nationwide) but not quite world-class.

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Re: Is it still worth buying a house in a state with insane property taxes

Post by pshonore » Fri Jul 28, 2017 10:45 am

jharkin wrote:I didn't read the entire thread yet...


Skimming I gathered that this is Illinois. A google search shows that they seem to have average property tax rates over $26/thousand. Ok that's high, but we need to know:

1- How is the rest of the tax burden in the state?
Are your income taxes, sales taxes, gas taxes, etc high, medium, low? Many states with high property taxes use that to offset low or now income/sales tax. The important part is the overall tax burden.

2- What do you get for it?
I live in Massachusetts and my property taxes are high but not as bad as you ($18?/thousand I think). But we have only average sales tax and slightly below average income tax which balances it out to put our total tax burden just middle of the road nationally. And for that tax burden I get some of the lowest crime rates, best rated primary schools and healthcare in the nation, world class Universities and teaching hospitals, plus a booming technology job economy in Metro Boston. I think its a fair trade.
I'll agree MA is a nice place to live, but I have relatives there who have to pay for full day kindergarten (1/2 day is free) and pay for a school bus for a public school. There goes the property tax savings and more.

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Re: Is it still worth buying a house in a state with insane property taxes

Post by FoolMeOnce » Fri Jul 28, 2017 12:26 pm

lazydavid wrote:CPS is not so good except for the magnet/charter schools.
I disagree. CPS has lots of good K-8 schools that are not magnet/charter. Some are among the top in the State, like Coonley and Blaine (Bell, Burley, etc, etc). Though the home prices in some of those zones are quite high, and class sizes are still large. When we were looking for a long-term residence with the intent to use public schools, we had somewhere around 10-15 school zones that we were comfortable with.

Neighborhood high schools, though, are a tougher sell. But the number of selective enrollment high schools and charters is expanding pretty quickly.

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Re: Is it still worth buying a house in a state with insane property taxes

Post by michaeljc70 » Fri Jul 28, 2017 12:39 pm

CppCoder wrote:It's not like landlords are providing a charity and paying property taxes for you out of the goodness of their hearts. You are paying property taxes whether you rent or own. When you own the house, at least you get a line item bill that you can take as a tax deduction.
This.

rgs92
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Re: Is it still worth buying a house in a state with insane property taxes

Post by rgs92 » Fri Jul 28, 2017 12:47 pm

$10K property taxes on a regular plain-jane house house (25-50 years old, 3-4 bedrooms, $500,000-$650,000) is a property-tax bargain in the NYC suburbs in the whole tri-state area. So if you like a house and want it and can afford it, those taxes wouldn't be a consideration for me.

In many NY suburbs, those high property taxes don't include garbage or any waste or leaf pickups and you may have well-water (even in non-rural areas). And utilities are on poles very often. And I pay extra for sewers ($400/year, non-deductible). All of the above is true for me on a modest older house with well over $10,000/year property taxes. And there are no sidewalks and it's totally car dependent.

And from my travels, the ease-of-life and easy access to Chicago from the Western suburbs of Chicago makes living there much nicer than the NYC area. I always liked it out there when I spent time out there on business trips. The trains going into NYC are approaching 3rd-world conditions and have sky-high costs. I found the Chicagoland suburbs very pleasant and less stressful than NYC-land. I like those nice manicured housing developments and subdivisions in Chicagoland.

You know, the grass is always greener.

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jharkin
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Re: Is it still worth buying a house in a state with insane property taxes

Post by jharkin » Fri Jul 28, 2017 2:16 pm

pshonore wrote:
jharkin wrote:I didn't read the entire thread yet...


Skimming I gathered that this is Illinois. A google search shows that they seem to have average property tax rates over $26/thousand. Ok that's high, but we need to know:

1- How is the rest of the tax burden in the state?
Are your income taxes, sales taxes, gas taxes, etc high, medium, low? Many states with high property taxes use that to offset low or now income/sales tax. The important part is the overall tax burden.

2- What do you get for it?
I live in Massachusetts and my property taxes are high but not as bad as you ($18?/thousand I think). But we have only average sales tax and slightly below average income tax which balances it out to put our total tax burden just middle of the road nationally. And for that tax burden I get some of the lowest crime rates, best rated primary schools and healthcare in the nation, world class Universities and teaching hospitals, plus a booming technology job economy in Metro Boston. I think its a fair trade.
I'll agree MA is a nice place to live, but I have relatives there who have to pay for full day kindergarten (1/2 day is free) and pay for a school bus for a public school. There goes the property tax savings and more.
I paid for full day kindergarten. It was $3500 a kid for one year. Drop in the bucket compared to what many dual income families pay for daycare for many many years...

The school bus fee is only charged to families within a mile of school and it's about $200 a year.

Neither of these are gonna break the bank in this state where the median housold income is over $70k so I don't see the issue...

Fess McGee
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Re: Is it still worth buying a house in a state with insane property taxes

Post by Fess McGee » Fri Jul 28, 2017 2:32 pm

I'm downstate. We pay $7000 on a house and land worth about $400,000.

Not great but I have 3 kids in the local schools that we're very happy with so it's not a lingering source of contention.

The tax increase showed up in my payroll deductions this week. More fun.

IL certainly has its issues but I ain't going anywhere.

michaeljc70
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Re: Is it still worth buying a house in a state with insane property taxes

Post by michaeljc70 » Fri Jul 28, 2017 2:39 pm

You are going to pay the taxes one way or another whether you rent or own. The question should be if you want to stay in Illinois. The income tax is relatively low (even after it just went up). The sales taxes are high, especially in Chicago. The property taxes tend to be 1.5%-2.75% depending where you live and the type of property. I am still paying less than 2% (of the property value) even though they went up 25% in 2015 and 10% in 2016. As has been mentioned, if you have kids, the schools may not be acceptable. Again, depends where you live.

If you are open to the suburbs, there are some very nice ones that have good schools and relatively reasonable property taxes and good transportation to the city. . Cook county and Chicago are in the worst shape, so there is probably the most risk living there.

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Re: Is it still worth buying a house in a state with insane property taxes

Post by sschoe2 » Fri Apr 13, 2018 8:47 am

Since I started this thread a year ago my mom passed away at the end of January. I own 1/3 of the house and we plan to sell it this fall though it may take a while to sell given the condition of the interior (needs a lot of work and reno). I am still deeply conflicted but will have to make a decision soon.

I have 2 dogs, poodles, that muddy the waters or it would be a no-brainier. I am very fearful and uncomfortable buying a home in Illinois and would rather rent but with the dogs that is very tough and expensive.

I am seeing no signs of hope that the govt of this state can reform and create a govt that serves the people and that residents can afford. In fact the next likely governor JB Pritzker seems to have the same attitude as the others who created this mess that the only problem is that we aren't taxing people enough. Therefore it almost seems to me that buying a house here is like buying a timeshare. You can end up trapped paying exorbitant fees and can't sell it.

I really cannot move right now. I just got another raise/promo at work and in my profession (chemist) trying get a decent job is a near impossibility. Heck most of the companies around here don't even hire chemists that run a churn and burn permatemp/contract model.

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Re: Is it still worth buying a house in a state with insane property taxes

Post by LarryAllen » Fri Apr 13, 2018 8:56 am

Property taxes are just one of many taxes which are just one of many costs of life. Add them all up and compare to income in the area to determine if it's an affordable place to live. Talking about one item, in isolation, is a waste of time.

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Re: Is it still worth buying a house in a state with insane property taxes

Post by wolf359 » Fri Apr 13, 2018 9:59 am

Tax laws have changed since last year as well. You have to run the numbers for your situation, but a mortgage will probably not help your taxes. The standard deduction is double the previous amount, which means that it will probably not make sense to itemize. Not itemizing means the mortgage interest deductions will not apply.

Run a rent vs own calculator. There's one here: https://www.realtor.com/mortgage/tools/ ... alculator/ That one includes property taxes by zip code.

In Chicago, I'd rent. My understanding is that the laws favor tenants if you're covered by the Chicago Residential Landlord Tenant Ordinance.

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