Financial death and taxes

We found that when we considered property taxes and cost of commuting, need for a car (with a central location, we don't need one...hurray Zipcar!!), etc Cambridge was among the less expensive places for us to live in greater Boston. The housing cost was much higher than other places, but total costs were lower.

We considered housing price, property taxes (including residential exemptions), average commuting costs, insurance (home owners and car), etc. We also considered the impact the income tax deduction would have based on the housing cost. We also did a 10 year projection. We didn't consider any possible price gains or increases/decreases in these costs. We were more concerned with a long term view on these additional costs (I don't need a car in the city, if I lived somewhere else, I'd likely need to replace a car within 10 years, etc)

I'm amazed how many people choose to buy somewhere without doing in depth financial analysis. The cost of the home is just the first cost, and doesn't consider actually living somewhere!

My sister made fun of me for paying so much more for a house than she did when I bought. But when we compared bills recently, the monthly cost of her 2 cars, gas, insurance, property taxes, etc were a couple of hundred dollars a month more than mine (note, we have similarly sized three bedroom 2 bath homes). Her total costs of living is higher in Revere than mine is in Cambridge.

One reason I don't own anything in Somerville is the property taxes are almost twice as much as Cambridge. It's like owning in a building with a professionally managed HOA and communal heat. It just adds too much onto the cost of living.

The commercial rates in Cambridge are too high and I worry that this is bad for the long term health of jobs in the city.

Cambridge has a $200k deduction for owner-occupiers. I like this deduction as it saves me money, but it is incredibly unfair. Why do I get a deduction but my tenants don't. It also seems like a scam to keep voters (i.e. owners) from getting mad about high taxes, while taxing the hell out renters that either can't (immigrants) or don't bother (short term residents).

Anyone, that is angry about the amount they pay for their property taxes, I suggest you take a look at how much in total compensation the local police and firefighters are making. I know a local municipality that has 3 full time cops but is paying the retirement for 9 others. Many cops and firemen in Boston are making over $150k/year plus expensive benefits/retirement us in the private sector could never get. Someone will call me a lier, but all city salaries are published in the Boston Globe. Take a look for yourself.

How are they "taxing the hell" out of renters? Renters don't pay property taxes. Does Cambridge have a city income tax I don't know about?

ummm, correct me if i'm wrong but most other states don't have an excise tax. and our gas tax is higher than most every other state. i'm missing others, but this place is called taxachusetts for a reason.

I always warn home buyers not to get to caught up over a $500 or so a year in taxes. A community that has slightly lower taxes this year might be a year away from a Proposition 2 1/2 override. So much for the in-depth analysis.

I heard New Hampshire has a very affordable property tax.

Susan (#3), yes the landlord pays the property tax but if you think that that cost isn't passed onto the tenant you are out of your mind. Politicians love taxes that people don't see. I don't mean to be insulting, but are people really that naive that they think as renters they are getting a free ride on property taxes? In Cambridge the people getting a free ride are the owner-occupiers (myself included).

I understand how renters don't see property tax as an issue as they have no idea how much it is costing them. But how could anyone think they are getting a free ride on property tax?

@#5 (Rich Rosa), the difference in property taxes on a $400k property in Cambridge vs. Somerville will get you an extra $40k in property for the same monthly payment. That's not pocket change and something to consider.

An answer to "Yea, Okay" about "Taxachusetts": According to taxfoundation.org, Massachusetts ranks 23rd in total state taxes compared to other states, and 3rd in per capita income, after Washington D.C. and Connecticut.

Live in Burlington

My favorite answer to Rona's question is the City Of Boston. For the value of the property and proximity to amenties, the tax rate is low, especially with a residential exemption. I am not talking about downtown. Neighborhoods like West Roxbury, JP, Roslindale, Dorchester and Charlestown all have their own unique character and amenities. But the tax rate is only a small part of the story when considering where to live.

New Hampshire has no sales tax and no income tax but they have high property taxes. (The revenue has to come from somewhere.)
The total cost of housing for owners is based on P.I.T.I.A. (Principal, Interest, Taxes, Insurance and Association fees). Therefore, if one or more of those factors is high, there will be less money available for the others. Lenders typically allow 28 to 31 percent of a borrower's gross income to go to PITIA. The more that is paid in property taxes, the lower the amount that can be paid toward principal and interest based on lender's allowances and, hopefully, personal budgets. Therefore, relatively high property taxes often result in lower home values. There is good advice from others here about looking at the total cost of ownership in each city or town.
Don't forget to factor in education if you have children. If you have a low cost town with schools that don't satisfy your child's particular needs, sometimes it can be less expensive and a better long term plan to move to a more expensive town and use the public schools while diverting former education funds to tax deductible mortgage interest payments. That is what I did and it was one of the best things that I have ever done for my kids.
Many people talk about not wanting to be "house poor" but it is also possible to be "education poor". Private schools for two kids can often cost the same or more than a home in a community known for its schools and there are no tax benefits for private school education. The resale potential and appreciation rate can often be better in those towns, too.
There is no one decision that works for evryone. All decisions need to be based on personal circumstances and a mid to long term home ownership plan for the individual or family.

Well, I'm a landlord and I don't pass property tax increases onto my tenants. It's hard getting good tenants, I certainly don't want to make my apartments too expensive for them to stay. I'm just not greedy. I charge below market rents and get good tenants who stay for a while. The peace of mind is worth less "profit" to me. (Profit is in quotes because it goes right back into maintaining and improving the house.)

As for taxes, I live in Boston, and I have always thought the property taxes are reasonable. I don't expect to get city services for free.

How high are property taxes in NH? Higher than in Sharon or Newton or Needham?

You get what you pay for. Have high taxes and great public education systems, or not. There is a reason people in Mass. public schools get a better education than those in Texas.

#11(Susan), so if you are at the break even point with your property as you say you are and your local municipality doubled your taxes, so now it is costing you $250/month to rent your property, how long would you keep paying out that out of pocket money? My guess is not very long. That below market rent you are so proud of, well guess, what the market has calculated the cost of property tax into it. You charge below market rent not because you are a philanthropist but because you want to minimalize turnover in your property. That is a business decision. Like in 20 years I have never raised anyones rent. Why? Because it makes my life easier and I believe it lowers my risk of having a bad tenant.

#13 (Foreclose on them all), there is no correlation between money spent on schools and the quality of eduction in developed countries or even in the US. If you want to improve education only the teachers unions will tell you money is the answer. I don't mind paying taxes. What I do mind is the money I pay being wasted and the simple fact that compensation from public service jobs is almost twice of the private sector.

New Hampshire has the third-highest property tax per capita in the nation. A $500K home now listed in Manchester has taxes of $6,141. There's a house in Needham right now listed at $499,900 with taxes of $4,987. Mass. taxes aren't dirt cheap, but anybody who thinks they're unusually high probably hasn't traveled much.

I've lived in a lot of states.

My taxes in Massachusetts are dramatically higher than elsewhere. The services are noticeably worse.

So I always find the "its not so bad here" a bit hard to believe. Looking at this tax return I'm about to send in, I'd probably pay more tax in only VT, CA, and NY.

A lot of those statistics fall flat when put up against reality. And yes, I regularly think of moving whenever I calculate how much extra I pay to live here.

"The services are noticeably worse." How about schools? I've noticed a lot of people on this board seem to have no kids, and therefore do not consider this ever a factor. MA schools are great on the whole. Notice also that the other states you mention, specifically CA and NY, also have good schools. See a pattern?

In general, what services do you find lacking that are better elsewhere?

bv - almost everything is poorly delivered, from roads to police to registrations... Ex schools, which are good in some towns indeed - which towns tend to be VERY expensive. But you can pay for schools, and its a lot less than I pay in extra taxes here. And the prep school I went to outside the Northeast was as good as any in the country... which my parents had no problems paying for on a professor's salary (Econ prof - you can blame the dismal science for my dismal approach).

I don't think CA schools are all that good. NH has some very good schools though, without an income tax. As does Texas (though in expensive towns granted)