Common sense and property taxes

mansion“I have the best property tax deal in America” said a retiree homeowner from Rhode Island. His town had the best kind of tax hedge: high-priced seasonal homes. “The owners of these houses use them in the summer, they don’t send children to the schools, and they pay 40 percent of the town budget.”

This creates a great deal for the year-round homeowners. Their taxes are low. They also don’t have industry built up around the town, changing its suburban feel. Traffic is a bit worse in the summer, but that is a small price to pay.

Smokestacks_3958Other tax hedges for a homeowner comes from industry. Towns with little industry put a burden on the residential owners to foot the bill. Towns with industry and business are easier on homeowner’s tax bill. But, some object to how these industries change the character of the town. (Mayors can never please everyone.)

Municipal taxes pay for municipal services. A big budget is needed to carry a “good” school system. Towns and cities also pay for fire safety, police, some road and bridge service, snow removal, garbage disposal, and many other services we take for granted.

Another tax that helps fill both municipal and Commonwealth coffers are transfer taxes. These are fees paid at closing. Currently, residential property sellers are paying $4.56 per thousand. For every $100,000 of sale price, $456 is added to the seller’s costs. A typical sale in our office is around $500,000 (tax cost $2280.) The added cost is calculated by the seller and built into what our clients pay. So, this tax costs our buyers.

My professional association is up in arms about an increase of ten cents per thousand. That indirectly costs my clients an additional $50 on their $500,000 purchase.

p-townThe second tax that my association is lobbying against is a local transfer tax in Provincetown. Like the Rhode Island town that the happy retiree lives in, P-Town has a lot of vacation properties that are inhabited part of the year. People buying vacation rentals in Provincetown would have an additional .5 percent fee, in the form of a transfer tax. This one would be paid directly by the buyer. On a $500,000 purchase, that is a cost of $2,500.

Here’s the way the news came from my professional association:

Real Estate Transfer Tax
A statewide real estate transfer tax of ten cents per thousand dollars on all real estate sales was heard by the Revenue Committee in June. GBREB and MAR expressed strong opposition to the bill which was filed by Representative Sean Garballey (D-Acton). H.2516 is the first of two transfer tax bills GBREB is opposing. The Second, H.3300 would allow the town of Provincetown to impose a 0.5% real estate transfer tax payable by the buyer to raise money for Town’s general fund. H.2516 was filed by Representative Sara Peake (D-Provincetown) and Senator Dan Wolf (D-Harwich). Both bills are currently before the Revenue Committee.


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