Study Finds Large Metros with Highest, Lowest Real Estate Taxes
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Study Finds Large Metros with Highest, Lowest Real Estate Taxes

real estate taxes

To develop its ranking, LendingTree analyzed the average amount of real estate taxes, mortgage interest, and mortgage insurance premiums. After crunching the data, the online loan marketplace ranked the United States’ 50 largest metros to show where homeowners paid the lowest and highest taxes on their properties.

Significant changes in tax law mean a world of change for real estate investors.

Taking effect in 2018, the Tax Cuts and Jobs Act is the biggest shift in U.S. tax law since the Tax Reform Act of 1986 and creates several advantages for investors. In addition to a favorable Section 179 deduction rules for real estate, the law allows for more deductions for personal property expenditures, which can be costly for larger real estate investment operations.

The law also changes to how much homeowners pay in property taxes, thereby shifting what large metros pay the most compared to other areas. And now with a new report from LendingTree, investors now have more insight into what metros elicit the highest property tax rates. 

To develop its ranking, LendingTree analyzed the average amount of real estate taxes, mortgage interest and mortgage insurance premiums. After crunching the data, the online loan marketplace ranked the United States’ 50 largest metros to show where homeowners paid the lowest and highest taxes on their properties.

Among its findings, LendingTree discovered that large metros in less populated states tend to pay less in real estate taxes. On average, homeowners in Birmingham, Ala., Louisville, Ky., and Salt Lake City pay $2,600 in real estate taxes — the lowest out of the 50 largest metros in the U.S., LendingTree reported.

Conversely, metros in densely-populated states tend to pay far more in property taxes. On average, New York, San Jose, Calif., and San Francisco paid $9,400 in real estate taxes, which is nearly double the average amount paid across the 50 largest U.S. metros, according to LendingTree.

The average amount of mortgage interest paid across all metros is about $8,500, according to LendingTree. But regardless of the area, homeowners in all of the 50 largest metros could benefit from itemizing their tax returns — and, in particular, those that own multiple properties, LendingTree said.

“Relatively few Americans itemize their tax returns because they either save more by taking the standard deduction or find taking it more convenient,” LendingTree wrote. “People who pay very high property taxes, mortgage interest and/or mortgage insurance premiums can sometimes save more by not taking the standard deduction and instead itemizing their tax returns, but this usually isn’t the case. Consequently, this is why around 7 in 10 federal tax returns filed don’t contain any specific info on things like real estate taxes or mortgage interest paid.”

Check out the graph below to see how the 50 largest U.S. metros rank in real estate tax affordability.