The recent federal tax code overhaul limits deductions for state and local taxes, which include property taxes. That could be costly for taxpayers in many states.
WalletHub recently released state rankings for property taxes. They shed light on who will be digging deeper into their wallets come tax time.
Property taxes on real estate
The financial data site reports that the average American household spends $2,197 on real estate property taxes each year. The bill is higher than that in many states — as high as $4,437 for a typical home in New Jersey.
For each state and Washington, D.C., WalletHub calculated the annual property taxes for a $184,700 home. That is the median home value in the U.S., according to the latest Census Bureau data.
Based on these calculations, the five states with the highest real estate taxes are:
- New Jersey: Annual taxes on a median-price home are $4,437
- Illinois: $4,288
- New Hampshire: $4,038
- Connecticut: $3,733
- Wisconsin: $3,602
At the opposite end of the spectrum is Hawaii, where the annual taxes on a $185,000 home are $501.
Property taxes on vehicles
In the 27 states that levy vehicle property taxes, the average cost to residents is $436 per year.
The five states with the highest vehicle taxes — applied to the value as of February 2018 of a Toyota Camry LE four-door sedan, the highest-selling car of 2017 — are:
- Rhode Island: Annual taxes on a $24,000 car are $1,144
- Virginia: $971
- Mississippi: $813
- South Carolina: $651
- Connecticut: $609
Among the 27 states that impose vehicle taxes, Louisiana has the lowest rate. Taxes on a $24,000 car would run you just $24 per year.
Property tax deductions
The tax code overhaul enacted in December limited the amount of state and local taxes — including property taxes — individuals can deduct on their federal tax returns.
Starting in tax year 2018 — the return you’ll file next year — the cap will be $10,000 for married couples filing joint tax returns and $5,000 for those filing separate returns. This change, which will remain in effect through tax year 2025, has sparked controversy partly because property taxes can vary widely from state to state.
As Money Talks News founder Stacy Johnson writes in “Ask Stacy: How Can I Fight My Property Taxes?“:
“Here in South Florida, for example, the annual tax bill for my 2,200-square-foot home is close to $9,000 annually. Outside Atlanta where my parents lived, they were paying less than $1,000 per year.”
What are your thoughts on property taxes? Sound off below or on our Facebook page.