After yesterday’s post on Financial Psychology of Money, there was a good comment on how Property Taxes can add an interesting twist in my statement: ” … the only time the price of your house matters is when you sell it … “.
Property Taxes (or millage tax), is the only tax where you have to pay a percentage of the “perceived” value of something. If you bought your house for $100,000, that year, your taxes will be based on a valuation of $100,000 (or at least it should, sometimes they try to “zap” you with a higher rate, however you can dispute that valuation, because the value of the house that year was $100,000). After that you are at the mercy of the firm doing the “valuations” of your property (and the jurisdiction inflicting the tax on you).
Say my neighbour sells his house for 100% more than what I bought mine for, many times, your “valuation” will increase because of this sale. If you feel your valuation is too high, you can try to appeal it, fight it, or whatever and sometimes it works, but a lot of times it does not (but fight it anyhow!).
Property Tax is the lamprey that can grow fat on a housing bubble, there are countless stories of fixed income retirees in Vancouver having to sell their houses because they could not afford their property taxes (due to astronomical valuations). Many times these are people who paid their house off, however, they cannot afford the property taxes.
What is a lamprey?
While lampreys are well-known for those species which bore into the flesh of other fish to suck their blood, most species of lamprey are not parasitic and never feed on other fish.
Yes, the lamprey gets fat on its host, much like a property tax sucks the life out of you because your house is appreciating in valuation. Yes, I am being a bit facetious, and ranting, however I do stand corrected the price of your house does matter in terms of how much property tax you must pay (unfortunately).