View Tax???

[fatlazyless]

My two-bed Meredith Winnipesaukee waterfront kozy-kottage has gone from $2800. to 10,000./year prop taxes in the last three years while the assessmment has gone from $240k to 801k. Thanks in part to our 'NH Advantage' system of taxation based on the local property tax! So, who has the advantage here?

[jonr]

Originally Posted by fatlazyless

My two-bed Meredith Winnipesaukee waterfront kozy-kottage has gone from $2800. to 10,000./year prop taxes in the last three years while the assessmment has gone from $240k to 801k. Thanks in part to our NH Advantage tax! So, who has the advantage?

If your property really has increased by $561k and your taxes have increased by $7.2k then you are in a good position. $561k / $7.2k = 80 years of paying the taxes from the increase in equity. And that is ignoring the time value of money which would make things a lot better (160+ years perhaps?)

Put another way the newfound $561k of equity will continue to grow. If your property value continues to increase at more than 1.3% you will always be ahead of the game ( $7.2k / $561k = 1.3%, so all you need is a 1.3% return on the $561k a year to pay the increase in taxes).

And of course it's mostly the land value that drove your increase. It is amazing what waterfront land is worth today.

[fatlazyless]

Yes, the mortgage is paid off and I'm the sole owner and my numbers are correct. Your comments about the increase in equity are all well and good, but when the property tax bill is due one has to come up with a cash check. It's not like I can present the tax collector with a wheel barrow of waterfront rocks & soil and some old shingles and explain they represent 1.3% of the assessed value.

Probably, with the property tax assessment increases, a number of Meredith homeowners have this same problem. Hey, misery loves company!

[TomC]

Originally Posted by fatlazyless

Your comments about the increase in equity are all well and good, but when the property tax bill is due one has to come up with a cash check....

i think he is suggesting that you convert some of the equity into cash, by perhaps a reverse mortgage or home equity line...

[wehatetoquitit]

California answered the question of escallating property taxes long ago with proposition 13. This proposition locked in the assessed value on the date of passage and is only allowed to increase at the rate of 1 to 2 percent per year, unless the property is sold. Then the property is assessed at its full market value and the new value (for tax purposes) then escallates at 1-2%/yr. If a City needs additional funds to operate, it must find other means of increasing revenue. This usually means higher development fees, permit fees, or a special sales tax, etc.

The purpose of this bill was to insure that older, retired, or those on fixed income would not be forced from their homes do to increasing property taxes. Transfers between famly members is exempt from the re-assessment.

[jeffk]

Originally Posted by wehatetoquitit

California answered the question of escallating property taxes long ago with proposition 13. This proposition locked in the assessed value on the date of passage and is only allowed to increase at the rate of 1 to 2 percent per year, unless the property is sold. Then the property is assessed at its full market value and the new value (for tax purposes) then escallates at 1-2%/yr.

The purpose of this bill was to insure that older, retired, or those on fixed income would not be forced from their homes do to increasing property taxes. Transfers between famly members is exempt from the re-assessment.

In California then, a 45 year old, at the peak of his earning ability, who has been in his house for twenty years has a great deal. He has property that is worth a LOT more than what he paid for it and super low property taxes. Meanwhile, a twenty five year old, just struggling to get started is going to have to pay a fortune for a house and get zapped with full current value property tax that will probably be a barrier to owning his own home. Part of the reason that property is so expensive in parts of California is because of laws like this. Only people with uber money can afford to live there and they bid up prices.

This may have helped some seniors but it's also a great example of the "I've got mine!!" philosophy. "I have my house and a great property tax shelter, nuts to everyone else!!" Also, its not a very discriminating solution. Why do seniors or actually long term California property owners, as a class of people, deserve blanket exemption from property tax? Many seniors (and long time property owners) are quite well off and can easily afford property taxes.

I recognize that our New Hampshire property tax system, and reliance on it as the primary source of state revenue, creates its share of problems. Others have pointed to various tax systems used by other states as the solution, but those states simply shift the tax burden around and in most cases are fiscally worse off than New Hampshire is. The most important control on the rate of any taxation system is spending control and spending control is far more difficult the further the government body is from the people. Federal government spending is out of control because it is almost impossible for people to exercise control of it. Yes, we constantly struggle with the paying our public bills in New Hampshire. It's painful to pay our taxes. Isn't that a good thing? Before we open our wallets to government don't we want to make sure that the spending is really needed? Doesn't tax pain cause us to look more closely at what the money is being used for. Most people pay as much or more in federal taxes than property tax. But the federal government plays a psychological trick on us and bleeds our money from us week by week in payroll taxes before we even get to see it. And think of all the wasted spending and fraud by the federal government. At least most of the property tax is used for education funding.

[Flylady]

Prop. 13 in general has allowed many family's to buy and KEEP their homes because they don't have to fear an escalating tax assessment for as long as they stay in their property. I too winter in Californa and summer in NH. I bought my NH lakefront 18 months ago. My parents inherated a wonderful lakefront from their family, however sadly they had to sell it because they could not afford the insurance and taxes. We alway had great memories as children on the lake and I hope my grandchildren will as well. What I have done to ensure the place stays in the family after I am gone is I have appointed a trustee to pay for taxes, insurance and certain type of up keep for 15 years after I am gone. Of course it takes a little financial planning to fund that type of a maintenance account. A life insurance policy will do most of it. I have faith that the good people of NH will keep our local officials in check with the power of the vote long after I have departed! However as others have pointed out....spending and cost of maintence will alway cause taxes to raise. Lets just hope at inflation level not faster than it.

[MJM]

Originally Posted by Flylady

What I have done to ensure the place stays in the family after I am gone is I have appointed a trustee to pay for taxes, insurance and certain type of up keep for 15 years after I am gone.

This is an honorable and well-intentioned goal, but if you're open to a little friendly advice...you may want to reconsider. We, as a family, had this discussion ahead of time (prior to the previous generation becoming very elderly or gone), and after a great deal of thought, discussions, and opionions from legal and financial experts, opted not to do it. (A somewhat heartbreaking, but "it's for the best" decision.) It of course varies with each particular situation, and I'm sure there are examples of it working, but I think it's a perilous road.

For the sake of discussion, let's say:
~ Mom and Dad have owned a decent place on the Lake for 50 years.
~ Because of the skyrocketing values, the place is now worth $1 miilion
~ They lived comfortably, not wealthily, and all other assets totalled $300k
~ They also left a trust to cover the cost of the place when they are gone.
~ Their grown children (Huey, Duey, and Luey), each deserve an equal share of their life savings.

A few possible scenarios to consider:
- Huey never really got his life in full swing, and hasn't ever owned a home. By being a 1/3 owner, he is entitled to all rights of ownership, so he moves in permanently. But Duey and Luey live hours away, and own their own homes. So they consider it a weekend/vacation place, and only get up there for those times. Is it someone's permanent home, or a vacation place?
- Although Duey loves the Lake, he really enjoys Maine better. He'd prefer, no disprespect intended, to buy a place there, but Huey and Louie only inherited $100k in cash, so they can't afford to buy him out of his 1/3.
- Luey's job forces him to move to the west coast, so he'll never (hardly) get to enjoy the place. Why would he want to own 1/3 of it?
- Duey hits a rough patch in life. He loses his job, and his son needs expensive medical care. On paper, he's worth $333,333, but he can't get at it to pay the bills.
- Luey can afford to send his quadruplet daughters to a decent college, but with his share ($333,333) of the house's worth, he could send them to a great school. Being a terrific father, that is his preference - he'd rather forego vacations/weekends on the lake to be able to do that for his daughters.

And there are numerous other issues like liability, general family issues of not getting along, etc etc.


Don't get me wrong, in a perfect world, it'd be fantastic to be able to hold onto the family place for generation after generation. It's just less and less feasible to do so, in my opinion.

[Parker Island Fun]

There can be no dumber way to raise taxes then what they have cooked up in CA. They are one of the most highly taxed citizens of our nation. and please never mention this state and our lakes to any one who likes to live in the Golden State, please!

[wehatetoquitit]

I agree, the CA way is not the way to go we are heavely taxed. I am only suggesting that CA long ago faced the issue of escalating RE taxes and fixed income home owners. The issue forced the City goverments to be more accountable for the dollars they collected. By reducing the ability to raise RE taxes any time someone on the board of supervisors (in NH case- selectmen) decieded that some project was needed, the expenditure had to be justified. In additions, other methods of raising fund were implemented, such as higher development fees for developers, sewer and water hookup fees, etc.. Therefore, only those applying for the additions paid the fees. In addition, any improvements needed by the local jurisdictions which were outside of their budget needed to be approved by the voters, such as bond measures for education, sewer treatment facilites, and so forth. I as a voter actually have a say in how my local money is spent by allowing the city gov. to "add" a special assessment to my tax rate.

[wehatetoquitit]

You have some good points, especially regarding spending. However, I have to take exception to the "I have mine" comment. Calif. has a sales tax, as well as an income tax to run state gov. In addition, each town, county has their own tax rate, as does the cities in NH. Therefore the people who consume pay a tax which helps pay for local gov. I also find it hard to believe that a high property tax "helps" a strugling 25 year old buy a home in NH. How does that work? Calif is about 4-5 times larger then NH and not all of Calif is LA or San Francisco, or Silicon Valley, where prices are greatly inflated.

I do agree that ownership longevity pays off. We have all seen our property values increase, no matter where we live, and when and if we deceide to sell we will all benefit.