While doing a comparative market analysis for a client, I noticed that half the condos were paying almost twice as much in taxes than other condos that were pretty much the same size and location.
The difference wasn’t that some were renovated, thus worth more and assessed higher. The difference was whether the owners were owner occupants or investor owners. Some towns give a tax break to owners who live in their homes.
The difference is significant. I did a little more checking. Some of these owner occupied condo were taxed at the higher rate because the owner hadn’t applied for their exemption.
They were giving Cambridge an extra $2,232.25 because they didn’t fill out a form. Don’t let that happen to you.
About Real Estate Taxes
A municipality knows how much the total residential value needs to be to make the municipal budget work. When taxes go up (they only go up!), the municipality either raises the rate for all residential properties at once, or keeps the rate the same, but collects more because of higher assessments. The tax for any particular house is calculated by the assessed value times the tax rate.
So, how do you know what taxes you should plan for?
Check the taxes on the sample houses in a town to use as an estimate of the taxes you will pay. Your agent can get you the data you need to make this estimate. Taxes are meant to be roughly the same across homes that are similar in value. Be aware that land is taxed, so big yards can increase your tax burden. When the house is re-assessed, the assessed value can go up or down. (Mostly up!) This happens, municipality-wide, every couple of years.
Why did my taxes go up the minute I bought?
If you purchase a property that has been recently converted to condos or has been recently renovated, the tax assessment on the MLS page you have may be based on the property before the renovation. To get an accurate picture of what the taxes may look like after closing, ask your agent to find similar properties that are assessed for this year that are like your newly renovated property.
How to file for a residential tax exemption
Residential exemptions are common in municipalities that have a lot of rental property. I have listed just a few below. If you are looking in a town with rental property, google your town name and “residential tax exemption” to double-check.
Somerville: 35 percent, up to $3,105 https://www.somervillema.gov/sites/default/files/fy19-property-tax-update.pdf
Boston: up to $2,719.09 https://www.boston.gov/departments/assessing/filing-property-tax-exemption
Watertown $1,906.85 https://www.watertown-ma.gov/61/Assessor
Malden 50 percent https://www.cityofmalden.org/602/Residential-Tax-Exemption-Program
Brookline $3792 https://www.brooklinema.gov/161/Residential-Exemptions
(Most suburban towns do not have this type of exemption.)
How to apply:
There are some state-wide exemptions, too. https://www.mass.gov/lists/property-tax-forms-and-guides#guides-to-real-estate-tax-exemptions-in-massachusetts-