The Most & Least Taxing States to Live and Retire In

From Bloomberg’s look at state taxes.

Arizona

Income tax: 4.54%

Sales tax: 6.6%

Property tax per capita: $1,043

Inheritance tax: None

The tax burden in Arizona is small compared to that of other states because of its lower-than-average property taxes, so the decline in home prices has hit Arizona’s municipalities harder than those in many other states. The sales-tax battle between states and online retailers is raging in Arizona, where the sales tax is one of the few ways to close state and local budget gaps left by the decline in the real estate market and the slumping economy.

“The tax burden in Arizona is small compared to that of other states because of its lower-than-average property taxes”

Arizona Property Taxes vs. California vs. Florida vs. Texas

Which reminds me of an online comment I recently made to a Canadian asking about Arizona property taxes;

In ARIZONA, Canadians and other foreigners who own homes pay the same property tax rate as their Arizona neighbors next door. Canadians are treated the same as Arizonans for property tax purposes.

It is my understanding that CALIFORNIA on the other hand has a system where new California home owners pay tons more in property taxes than their California neighbors who bought years or decades earlier. Arizona doesn’t do that. Arizona doesn’t discriminate against new homeowners.

FLORIDA has a system which puts a ceiling on property tax increases for current owners, if I understand correctly. Their system has the effect of increasing property taxes on new homeowners. In addition, permanent Florida residents get a property tax exception ($25,000 of property value isn’t taxed for permanent residents (?)) that part-time residents don’t get which also has the effect of increasing property taxes for Canadians.

TEXAS property taxes are huge, roughly 3 times what they are in Arizona. Texas doesn’t have an income tax so it hits property taxes real hard.

The conclusion is to be sure and include property taxes when comparing home ownership costs in different states.

FYI, many online websites will show the actual property taxes paid in a recent year for Arizona homes listed for sale. That’s the best way to go versus using a rule of thumb to estimate property taxes.

(I am not a U.S. property tax expert so please let me know if I got any of that wrong.)

FYI, in the comment above about Texas, I was comparing property taxes rates not the property tax per capita.

ADDED: Reader Bob emails me, “Yes,it’s true about California new home owners paying more, but you need to factor a home in Ca. comparable to Az. is at least double, so the taxes are a lot more already.” That reader also says that in California they’ve added a lot of fees on top of property taxes to get around the legal limits on property taxes in California.

ADDED: I got an email from a different reader who disagreed with what I wrote, however, the only exception I could find was for low income widows, widowers and disabled people. The exception could reduce a person’s Maricopa County property taxes by about $350 per year. Here is what the Maricopa County Assessor’s website says.

Property Exemptions

Is the exemption for my house only? No, the exemption is applied to the real estate first, then to a mobile home or automobile.

What are the qualifications?:

  • You must be a resident of Arizona.
  • Total Assessed Valuation in Arizona for 2012 cannot exceed $23,991. (This property assessment usually equates to a $239,910 home value).
  • Household income limit from all sources for widows, widowers and disabled persons with no children under age 18, excluding social security, cannot exceed $29,421 in 2012.
  • If children under 18 years of age reside in the household, income cannot exceed $35,305 in 2012.
  • Disability must be total and permanent and certified by an Arizona licensed physician on Arizona Department of Revenue form DOR 82514B.

If qualified how does one benefit? The Assessed Value of the property is reduced by no more than $3,530 for the 2012 tax year with a corresponding reduction in taxes.

How do I get more information? Call the Maricopa County Assessor’s Office at 602-506-3406

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