For those who are planning to buy or build their dream house, you might want to consider the estate tax rates (or property tax rates) in the city where your home will be situated. While the expense of purchasing or construction of a house ends after all costs are paid, paying the estate tax remains an annual duty. The Lincoln Institute of Land Policy came up with a study that helps us compare the property tax rate per city in the US for 2016. And based on the study, here’s a list of cities that collect the highest estate tax.
High Estate Tax Rates: Top 15 Ranking Per City
1. Bridgeport, Connecticut
Connecticut’s Winners and Losers In The Senate Tax Bill https://t.co/YCtXPi388W pic.twitter.com/YXIjEDTZO8
— Bridgeport Patch (@BridgeportPatch) December 6, 2017
- Estate tax rate: 3.81%
- Estate tax bill: $6,360
- Median home value: $167,100
For the past 2 years, Bridgeport ranks as the city with the highest estate tax rate. It is one of the three US cities that have estate tax rates higher than the average rate in the country. It also has the highest property tax reliance among all US cities. Despite its high property tax, residents do not pay sales and income taxes to the local government.
2. Aurora, Illinois
- Estate tax rate: 3.72%
- Estate tax bill: $6,300
- Median home value: $169,400
Just like Bridgeport, Aurora is among the three US cities that have estate tax rates higher than the average rate in the country. It also has a high property tax reliance. Surprisingly, Aurora ranks higher compared to Chicago, which is the largest city in Illinois, and one of the most populous cities in the US.
3. Newark, New Jersey
- Estate tax rate: 3.20%
- Estate tax bill: $7,547
- Median home value: $235,700
Newark’s ranking, in the list, jumps from 4th in 2015 to 3rd in 2016 due to its increase property tax reliance. Similar to Bridgeport, there’s no sales tax imposed in the city.
4. Detroit, Michigan
Republican tax plan aims at killing #HistoricTaxCredit vital to Detroit’s recovery https://t.co/7JDlEAZxlR / @JGallagherFreep pic.twitter.com/KoMavOsko8
— Alexander Company (@alexander_co) December 6, 2017
- Estate tax rate: 3.15%
- Estate tax bill: $1,341
- Median home value: $42,600
Compared to all cities in this list, Detroit has one of the lowest estate tax bills. It also registers the lowest median home values among all US cities. However, it joins Bridgeport and Aurora, in having estate tax rates higher than the average rate in the country.
5. Milwaukee, Wisconsin
- Estate tax rate: 2.67%
- Estate tax bill: $3,043
- Median home value: $114,000
Among the big cities in the country, Milwaukee is the only one that uses estate tax as its only form of local taxation. In fact, the Lincoln Institute of Land Policy has revealed that estate tax in Milwaukee accounts for 96% of local tax revenue in the city.
6. Des Moines, Iowa
- Estate tax rate: 2.30%
- Estate tax bill: $2,748
- Median home value: $119,500
This city is notable for providing beneficial tax treatment to lower-valued estates through credits, exemptions, or preferential assessment practices. Just like in some cities mentioned earlier, there’s also no city sale tax in Des Moines.
7. Manchester, New Hampshire
- Estate tax rate: 2.25%
- Estate tax bill: $4,701
- Median home value: $209,200
Although it ranks high on the list, Manchester has witnessed one of the biggest estate tax drop for 2016. But still, its residents — particularly the poorest in the area — were surprised when the local government imposed a 20% increase in the council tax.
8. Burlington, Vermont
- Estate tax rate: 2.14%
- Estate tax bill: $6,044
- Median home value: $282,800
The Lincoln Institute of Land Policy has also noted a drop in the estate tax rate in Burlington for 2016. However, city officials have warned there might be a large increase in property taxes next year.
9. Baltimore, Maryland
- Estate tax rate: 2.09%
- Estate tax bill: $3,247
- Median home value: $155,600
While the city joins the list of cities with high estate tax rates, it has actually started implementing a 20% property cut tax since 2013. The city has also made available, several tax credits for home buyers, to allow them to afford to buy a new house.
10. Columbus, Ohio
- Estate tax rate: 2.04%
- Estate tax bill: $2,803
- Median home value: $137,100
The city of Ohio holds the second highest jump in this list — from 13th in 2015 to 10th in 2016. Its effective tax rate on commercial estates rose by 10%, on industrial properties by 8%, and on apartments, also by 8%. Because of this, a drop in sales in commercial properties has been reported in the city in 2016.
11. Omaha, Nebraska
The Real Reason Home Prices are Increasing#Omaharealestate #Omahahomesforsale #topOmahaRealtors #topOmaharealestateagents https://t.co/2CNNGWpOZn pic.twitter.com/GINzWntODS
— Troy Trumm (@OmahaRealEstate) November 30, 2017
- Estate tax rate: 2.02%
- Estate tax bill: $2,888
- Median home value: $143,200
While Columbus rose on the list, Omaha dropped from its 10th spot in 2015. City officials have promised that they will pursue lowering the estate tax “if startlingly high preliminary property valuations become reality.”
12. Portland, Maine
- Estate tax rate: 1.99%
- Estate tax bill: $5,322
- Median home value: $267,100
While Portland is the most populous city in Maine, it’s actually one of the least populated city in the entire country. The city government imposes no local sales taxes to its residents. Portland recorded a drop in the list, wherein it used to be at 11th in 2015.
13. Buffalo, New York
- Estate tax rate: 1.97%
- Estate tax bill: $1,494
- Median home value: $75,800
Buffalo is the record holder for highest rise in this list — from 17th in 2015 to 13th in 2016. The Lincoln Institute of Land Policy credits this increase to the city’s high nominal tax rate and the drop in the value of houses in the area. The effective estate rate in Buffalo rose by about 13%.
14. Memphis, Tennessee
- Estate tax rate: 1.84%
- Estate tax bill: $2,713
- Median home value: $94,400
The Lincoln Institute of Land Policy noted that Tennessee has the biggest difference in the tax rate in the largest city, and the rural municipality among all US states. The tax rate in Memphis, according to the institute, is thrice the tax rate in Savannah. The city also imposes an additional 2.25% on sales tax.
15. Houston, Texas
Percentage of homes are valued at more than $500,000:
San Jose, CA +90%
San Diego, CA 63%
Houston TX 6.5%#Tax Change on Mortgages Could Shake Up the #Housing Market https://t.co/yaCczVhMdx— Kevin Corke (@kevincorke) December 6, 2017
- Estate tax rate: 1.78%
- Estate tax bill: $2,713
- Median home value: $152,200
Texas has a uniform property tax system that does not allow local government to impose different rates or assessment ratios on properties. However, Houston registers the highest effective rate. Also, with the onslaught of Hurricane Harvey, city officials are looking at raising property tax “if the state doesn’t free up more funding.”
The Lincoln Institute of Land Policy study shows that some cities pay more (or less) real estate tax than others. This video by Phil Pustejovsky, explains why most people are paying too much in property taxes, and even teaches how one can avoid it:
The cost of owning your dream house goes beyond simply buying or constructing one. You may have to consider the estate tax rate where the house will be purchased or built, to avoid being in trouble with the local government.
Are you paying estate tax in any of the top 15 cities cited above? Share with us your experience in the comments section below.
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