Property taxes are an inevitable, but important part of home ownership. They fund services such as parks, police departments, as well as public schools — and depending on where you live, you could end up with a much tax higher bill. If you’re looking to buy a home, Oklahoma is a great place to save on property taxes because it has some of the lowest rates in the nation.
Property Taxes 101
Property taxes are a detail many home buyers tend to overlook, but they can increase your mortgage payment, especially if you escrow. When budgeting for a home, factoring in the amount of property taxes you expect to pay is key. Keep in mind that they tend to increase annually — and often by fairly significant amounts. Choose a home in an area with low and/or stable property taxes so you don’t run into any budget issues later on.
When comparing cost in different areas, look for the effective property tax rate, which is the total real estate taxes paid divided by the home’s value. In the U.S., the mean effective property tax rate is a little over 1%,, but that can range widely. In New Jersey, the rate is 2.43%, whereas it’s only .87% in Oklahoma.
Buying a Home in Oklahoma is a Good (Tax) Choice
One of the reasons why Oklahoma has some of the most favorable property tax rates in the nation is because state laws place a strict 3% cap on assessed home value increases. That means if your home is assessed at $100,000 this year, the most that the assessment can increase the next year is $3,000. In hot real estate markets, this can be a big savings for homeowners.
According to the Oklahoma Policy Institute, “The property tax comprises 20% of total state and local tax revenue in Oklahoma, less than in most other states. Only local governments use property taxes in Oklahoma.” Furthermore, the Oklahoma constitution puts limits on property taxes and any increases must be voted on by the people. That helps keep things in check!
Money in Your Pocket
According to Smart Asset, “the median annual property tax payment in Oklahoma is $1,278, which is the 10th lowest amount of any state.” And the national median annual property tax payment is $2,578, netting Oklahomans an average savings of $1,300.
If you invested that $1,300 annual savings with a 5% return, you’d have saved almost $90,000 by the end of a 30-year mortgage. You could use the savings to pad your retirement nest egg, pay for a child’s education, or even treat yourself to a 4.5-month world tour.
By choosing a home in an area with low property taxes, you’ll keep more money in your pocket while ensuring your monthly housing payment remains affordable. With its combination of high employment, reasonable cost of living, and low property taxes, buying a home in the Sooner State is a win-win.