5 Property-Tax Changes Hitting U.S. Homeowners in 2023

Source: mansionglobal.com

Q: What property tax changes can U.S. homeowners expect in the coming year?

A: Homeowners in a few top markets will see changes in their tax bills next year due to both federal and local legislation.

In California, two significant changes will affect homeowners in Los Angeles and San Francisco. The mansion tax passed by voters in November in Los Angeles adds an additional one-time transfer tax on the sale of real estate valued at over $5 million. For properties valued at $5 million to $10 million, the transfer tax is set at 4%. For properties valued over $10 million, the rate increases to 5.5%. The tax goes into effect in April and will be a permanent change to the city’s tax landscape. The implementation of this transfer tax is estimated to raise up to $900 million annually in additional funds for the homeless in the city.

San Francisco will also increase property taxes to address the city’s housing crisis. Landlords and other property owners of buildings with three or more rental units will pay additional tax penalties if the units stand vacant for more than 182 days. Starting in 2023, the owners will need to rent out those units or face a 2024 tax penalty of up to $5,000 per unit. This rate will increase to as much as $20,000 per unit in future years, depending on the size of the dwelling. The goal of the tax is to prevent property owners from sitting on valuable real estate when rentals are in such high demand.

In 2023, Salt Lake City will see a historic 4.9% rise in property taxes. The city has not increased property taxes since 2014. 

For a home valued at $520,000, the median in the city, homeowners will pay an additional $130 a year. 

In Florida, lawmakers are looking to provide relief to homeowners whose property is damaged by natural disasters. If a residential property is rendered uninhabitable for 30 days or more, the bill provides property tax rebates for the portion of the year the property is defunct. The bill also provides $150 million in affordable housing assistance for residents impacted by hurricanes, and $60 million in repair, replacement, or relocation of housing costs, a portion of which is allocated to assist homeowners in paying insurance deductibles. 

On the federal level, wealthy property owners throughout the U.S. will be able to protect more of their assets for their heirs, as taxpayers will see an increase in the estate-tax exclusion. In 2022, the lifetime estate-tax exclusion was $12.06 million, but in 2023, the IRS will raise that rate by nearly $1 million to $12.96 million. Couples can combine their exclusions, enabling them to pass on nearly $26 million, before or after death. This estate-tax exclusion may fall in coming years, so taxpayers are encouraged to take advantage of the higher rates now. 

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Source: mansionglobal.com