Different Community Different Tax Regime
When you purchase a home you want to have all of the expense laid out before you so that you can accurately calculate your budget. This includes state income taxes, property taxes and all of the quirks and exceptions that go along with them.
Moving across country, relocating for work or other purposes is common enough that relocation agent is a specialization in real estate agency practice. When you do move long distance it is important that you are aware of the differences in the tax code that will apply and make a difference to the budget for your new home. Your relocation agent should be able to brief you about the tax burden you are taking on in your new community.
Paying State Income Taxes
When you move across the country you will notice the differences in home prices, which can often be quite substantial. What is often less obvious is the cost of taxes that you will have to pay in addition to your home loan, insurance premiums and any HOA membership fees. They can range from low to high for one state to another.
For example, if you move from Washington State, where there is no state income tax, to another such as California or Michigan, where there are state income taxes that can be quite significant, you might be in for a surprise when you work out your budget. What are the boundaries on local income tax? In some states taxes are diverse and abundant, which is not something you want to discover when you have just moved from the other side of the country.
Millage And Community Upgrade Taxes Add To Property Taxes
When you finance a home the lender will have a strong interest in avoiding liens on the property and fines for failing to pay local property taxes. For that reason when you take out a mortgage the lenders will impound a calculated amount each month to cover the taxes when they come due. This does make it much easier to budget, as property taxes are often due semi-annually. However, it will add to the cost of your monthly payment and you should be prepared for it.
With bond issues and millage or local additional tax rates for local bond funded projects, the difference can be stark from one side of a local community to the other. Similarly, new communities will often have a district bond that is paid by a local tax in addition to your property tax. In California they are referred to as Mello-Roos taxes after the legislators who drafted them. The purpose of such bonds is to pay for the new construction of roads and utilities to service the new homes.
The tax to repay the bonds typically takes fifteen to thirty years to amortize. This can make a difference to homes that are streets apart, even if both were constructed at the same time, if one is in an established subdivision and the other a new one the difference in taxes could be the deciding factor in affordability as to which home you choose.
Find Out The Exact Tax Burden Before You Move
If you are moving and buying in a community that you are familiar with, the local taxes and fees are less likely to catch you off guard than if you are moving across country and buying a home as you relocate. Make sure that your relocation agent or your realtor gives you the full breakdown.