Don't Mess With Taxes

Will this higher cost across the country be enough to convince lawmakers to revise the $10,000 state and local tax (SALT) federal tax deduction cap?

Before the Tax Cuts and Jobs Act (TCJA) of 2017 was enacted, I’d spend this time of year deciding whether to pay our home’s annual property tax bill by Dec. 31 or wait until its due date of Jan. 31 the following year got closer.

It wasn’t just a cashflow decision. It also affected our tax filing. Or did, as I noted, before the Republican tax reform bill limited the amount of state and local tax (SALT) payments we could claim as itemized deductions.

This year, as in previous ones, we’ve watched the value of our home, and hence its tax bill increase.

Here in Austin, property taxes make up 20 percent of the median housing bill. That’s more than anywhere else in the country, according to a recent Redfin analysis of property taxes for single-family homes among the 50 most populous U.S. metropolitan areas as of August 2024.

You can bet this report from the Seattle-based residential real estate brokerage and mortgage origination services firm will find its way into Capitol Hill arguments next year over the future of the TCJA’s SALT cap.

$10K too little: The tax reform law’s SALT limit is $10,000. That amount covers income taxes in states where those are collected, as well as real estate levies.

The limit is a reason the hubby and I no longer itemize. Of course, the TCJA’s much larger standard deduction amounts also were a factor.

Before TCJA, the SALT deduction was unlimited. Combine that with mortgage interest, charitable donations, and other qualifying Schedule A claims, and some taxpayers easily exceeded their standard options before the tax reform changes.

Now, even with the new tax law’s larger standard amounts, some still would get a bigger deduction by itemizing if the SALT limit was eliminated or at least revised.

SALT target as TCJA expiry date nears: That’s the goal a bipartisan group of members of Congress hope to achieve in 2025, as the SALT limit and other TCJA provisions enter their final year in the tax code.

It won’t be easy. The SALT claims tend to benefit wealthier taxpayers.

But in recent years, home values have increased by astonishing amounts in many areas across the United States. Some homes that once were considered middle-class abodes now are valued in the seven-figure range.

And when property values go up, so generally do the tax bills upon which they are based.

Bipartisan SALTiness about the limit: When the SALT cap was enacted, much attention was given to how the GOP-written tax bill hurt taxpayers in predominantly Democratic states with higher local income and other taxes.

However, that has shifted somewhat thanks to COVID-created changes in the housing sector.

Homeowners in the politically bright red Florida are leading the list of escalating property tax bills, according to Redfin’s recent.

“Property tax bills have increased since 2019 in nearly every major U.S. metro, with Florida home to three of the five metros with the biggest hikes,” according to the analysis.

The Sunshine State’s soaring property taxes are partly due to COVID-19 pandemic-driven migration and associated homebuying boom, and partly to the increasing intensity of climate disasters, notes Redfin.

The only bit of good news is that while property taxes nationwide have increased in dollars, the effective tax rate has declined. Still, the higher home values have pushed up the amounts homeowners must pay their local county or tax parish collectors.

Where property taxes are highest: Redfin found the median monthly property tax bill has risen most over the past five years in Indianapolis. The typical Hoosier homebuyer there pays 66.7 percent more today than they would have in 2019, bringing their monthly tax bill to $205.

Atlanta comes in second, with a 65.8 percent increase to $239.

Next come three Florida metros of Jacksonville, Tampa, and Miami. Property taxes in those cities have since 2019 increased, respectively, by 59.6 percent to $228; 56.7 percent to $250; and 48.1 percent to $367.

Overall perspective: Nationwide, property taxes, in dollars, have increased nearly 30 percent since 2019 to a monthly median of $250, says Redfin.

And even though the effective tax rate nationwide has declined, homeowners feel the burden of increasing property taxes because they’re paying more, in dollars, than they did previously.

On a metro level, monthly property tax bills have increased in 48 of the 50 most populous metros since 2019.

They have declined in just two: Las Vegas, where they’ve decreased 4.3 percent to $167, and Pittsburgh, where they’ve decreased 1.7 percent to $233.

The map below gives you a quick look at where property taxes stand in the county’s 50 most populous metros. Check it out at the Redfin site for an interactive version and to see the data in table form.

You also might find these items of interest:

• Tax-related relocations within the United States
• Comparing property taxes across the United States
• Popular home-related tax benefits already in the tax code

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