Property taxes are being accounted into a buyer's budgets since homeowners have now had several years under the 2017 Tax Cuts and Jobs Act (TCJA), with Texas ranking in the top ten of states with the highest property tax rate.
WalletHub ranked the U.S. states and the District of Columbia by property tax rates with Texas ranked as the state with the seventh highest rates and a real estate tax rate of 1.8 percent.
In Texas, the annual taxes for a $205,000 home, which is the middle value of homes in the U.S., was $3,703. The annual taxes for a $161,700 home, the middle value of homes in Texas, was $2,922.
Alabama had the second lowest property tax rate in the U.S., with a median home value of $137,200. Compared to Texas, Alabama's property tax on a state median value was approximately $840.
"The average American household spends $2,375 on property taxes for their homes each year," Wallethub reported in their ranking of the states based off of U.S. Census Bureau data.
Wallethub asked a group of experts on property tax why property tax rates are important and how these rates can apply to consumers.
The group of experts agreed that it's important to factor property taxes in when buying a home because these taxes can affect consumers' budgets. Two of the experts said not as many buyers factored property taxes into their budget in the past and had to adjust their budgets during the process of buying a home.
"Traditionally, property taxes were not an incredibly important consideration for people deciding to move from one location to another,” Andrew Appleby, an assistant professor of law at the Stetson University College of Law, told Houston Agent Magazine. “After the TCJA, state and local taxes generally are often now an overriding consideration in the relocation decision.”
Paula Worthington, a senior lecturer and academic director at the University of Chicago's Harris School of Public Policy, told Houston Agent Magazine that evidence shows that people are willing to buy more expensive houses in order to have lower property taxes.
It's also important for real estate agents to discuss property tax rates with first-time buyers.
"In a high tax state, it is not uncommon for monthly property taxes to be as much as a mortgage payment," Mitchel Franklin, associate professor of accounting at the Madden School of Business, told Houston Agent Magazine.
