It’s usually a fact of life: property taxes increase regularly in Palm Beach County. That fact was crystalized this week by Palm Beach County commissioners who voted to accept the budget proposals as presented the week.
While the county’s property tax base is not increasing from the standard $4.78 per $1,000 of taxable value, the same standard the county has used for 16 consecutive years, homeowners in our county will nevertheless see another hike in their taxes payable this year.
Why? It’s because property values are expected to increase throughout the county.
Property values affect hike in payable taxes
For homeowners whose properties meet minimum threshold values to induce property taxes, an increase in payable taxes are likely to happen. That’s because the county property appraisers office reports that property values have climbed 8% this year.
The good news for new homeowners who haven’t yet experienced the thrill of a property tax increase: the increase is capped if it’s your primary home. Your taxes cannot rise by more than 0.7%.
Don’t go splurge on that celebratory bottle of Dom Perignon yet, though – overall property taxes will rise by more than that, depending on what city you live in.
Increases to cover shortages for teacher pay raises, as well the need to cover a funding gap for the Palm Beach Sheriff’s Office will result in a few extra dollars you’ll owe for 2016. Those funding gaps cover the increased costs of pay raises, health insurance, and the hiring of new law enforcement officers and employees.
Also, the county is seeing this moment as a prime opportunity to bulk-up on savings and reserves, and municipalities are taking advantage of cheap long-term interest rates.
The county also uses property taxes to pay for operational expenses that include building and maintaining schools, roads, libraries, parks, and more.
Voters on November 8th could opt for higher taxes
Many issues are going to ballot this year on November 8th, where voters will decide how much money they are willing to be taxed, and for what.
The state is proposing a one-cent sales tax increase, which will primarily fund stagnant infrastructure projects over the next decade. Our country has a serious infrastructure deficiency problem, and South Florida is not immune. The $0.01 sales tax increase to $0.07 will give the state an addition $3 billion over ten years to address seriously deficient roads, buildings, bridges, shorelines, and more.
So what does this all mean for the Palm Beach County homeowner?
By now you should have received a complicated piece of paper by the Palm Beach County Tax Collector’s Office, which shows exactly what taxes you’ll be paying for 2016, and where that money goes. The table also includes what you paid in 2015 (or, if you just bought your house, what was paid in 2015).
If you filed for homestead exemption, which allows you to deduct up to $50,000 in taxable property value, this sheet will also show whether that exemption is applied. Homestead exemption is only available to homeowners who live in their home as their primary residence, and it must be re-applied for each year.
A good rule of thumb: with the homestead exemption applied, you should be paying somewhere close to about 1%-1.5% of your property’s estimated value (not the taxable value, the figure the property’s appraisers office calculates, which is often arbitrary, and almost unexplainable.)
For a home that sold for $250,000 in 2015, you should expect to pay somewhere around $3,200.
How property taxes are paid in Palm Beach County
As we get closer to November, and that fateful day when the county nobly takes your money, we will do a more in-depth article on how property taxes are paid. But in short, your mortgage company holds your anticipated tax bill in what’s called “escrow”.
Each month you pay your mortgage, you’re paying towards four different things: principle, interest, taxes, and (sometimes) what’s called PMI or MIP (mortgage insurance premium).
Principle and interest are the paying back of your loan, and MIP is to required if you loan-to-value is less than 20% (meaning that what you owe on your principle and interest combined equals more than 80% of the home’s value.)
Escrow is basically a bank account in trust. The mortgage company will require you to make payments towards your taxes each month, to ensure those taxes are paid (if your taxes aren’t paid, you could lose your home – and the mortgage company loses their first-lien on the loan.)
The mortgage company looks at trends, and the county’s tax-roll estimations. If the county says you’ll owe around $3,000 next year, then the mortgage company will levy an additional $250 in your mortgage principal and interest payment ($3,000/12 months = $250 per month).
“Many homeowners with escrowed mortgage payments will be hit with an unexpected increase in their monthly payment due to an under-collection of taxes throughout the past year”, said Brandon Brotsky of the The Stephens-Brotsky Group, this week. “As a result, mortgage refinances tend to increase in the months following the tax bills release.”
Come November when it’s time to pay the Tax Collector’s office, the mortgage company debits the money owed from your escrow account, like magic. The homeowner goes about their day, and are most of the time never the wiser!
Do you have more questions about how property taxes are paid in Palm Beach County? Contact us today – we love to answer questions, and we do it for free! Call 561-500-LIST (5478) to speak with a real estate agent today.