How to SAVE on Property Taxes

You NEVER really own a piece of property. Try not paying Property Taxes and see what happens. Property Taxes are not going away. Let’s look at the Uncommon Way to pay and SAVE!

Why is this important?

Property taxes is one of the major expenses homeowners pay each year.

  • Estimating the Cost of Propriety Taxes According to the National Association of Realtors the median home purchase was $257K in 2019.
  • Property taxes in most locations are based on property’s values, so recent purchases give us a good idea how much most people are paying. Let’s use $250K to make math easy. Tax rates range from close to 0 to more than 2%

For simplicity let’s say 1%, so $2,500 per year. We are also going to assume we have to make payments to the government twice a year, so $1,250 in this example.

Idea 1: Fight the Man

Dispute the value of the property! I’ve done this twice and saved about $18K over the 10 years in my house

How?

  • Look at recent comparable sales in your area for the last 6-12 months based on number of bedrooms, bathrooms and square footage.
  • If you think your property is worth less than what the government says pay a few hundred to have a professional appraisal done. It’s easy for them argue against a homeowners analysis. They take a professional appraisal much more seriously.

Do the math to see if this makes sense.

Idea 2: Be smart in How you Pay

***Disclaimer***

You need a mortgage that DOES NOT escrow Taxes and Insurance. It’s best to do this when you first setup the loan. You can do it afterwards but you may have to pay a fee. You also need a healthy emergency fund.

Step 1) Instead of saving future payments in a savings account build an appreciating asset This could be

  • A taxable brokerage account of Index Funds or Dividend stocks
  • Real Estate
  • Cash Value Life Insurance

I would shy away doing this with volatile assets like

  • Crypto
  • Growth Stocks

Step 2) Take a loan out against the appreciating asset to pay the taxes. For this to work well the loan should be no more than 5% APY

Step3) Look to see how your government takes payments especially the credit and debit card processing fees. Pick the best payment mechanism for you and pay it!

Step 4) Pay back the loan over 6 months in full.

Example

  • Annual Property Taxes:
    • $2,500
    • Increases 3% every year
  • Asset:
    • 5% asset appreciation
    • 4% yield 5% dividend growth
  • Payment Mechanism:
    • M1 Spend debit card
      • 1% cash back
      • Processing fee $3.50
  • Loan Terms:
    • 2% APY Margin Loan paid monthly

Is this process more complex than having the mortgage company do it for you?

Absolutely!

But whether forced to save monthly through escrow or paying a monthly margin loan payment, you pay monthly!

And in 20 years time I’ll happily take $48K for a little complexity.

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