Archive for the 'taxes' Category

The New Tax Bill and NJ real estate. Moody’s vs Otteau

Among those of us who live in Northern NJ, there seems to be a general view that the new tax law will negatively impact our individual finances (as shown in the map using Moody’s analytics) .  While it is understandable to feel that way, there is a more optimistic (or resilient) view of the new tax law’s effect on NJ real estate, which will be covered here by real estate guru, Jeffrey Otteau.

Screen Shot 2018-01-01 at 4.45.29 PM

My political tendencies may be showing here but, Paul Ryan and Donald Trump basically admitted to trying to penalize high tax states like CA, NJ and IL  (para 5,6,7 of this link  Ryan’s blue state comments  ), even though those states contribute more to the federal coffers than they receive.  Among those being rewarded by the law, MS, KY, AL and many other red states generally receive more than they contribute – New Mexico is the main state that doesn’t fit the pattern. – state contributions
So if you’re worried the new Republican tax law will crush home prices in New Jersey and you’re listening to the media coverage coming out of Washington, then you’re looking to assess impact and take appropriate action.  According to Moody’s, the tax plan will most likely hit NJ and other suburban areas of the bigger, mostly coastal cities harder than it will hit rural, southern, Rocky and Great Plains areas.
But here’s real estate guru Jeffrey Otteau’s optimistic take on the recent changes to the tax code earlier this week.  “There’s no reason to panic here,” said Otteau, president of The Otteau Group. “I heard some bold predictions about Armageddon, about house prices collapsing and losing 10 to 15 percent in value.  There’s NO basis for that.” 
Otteau believes overall NJ home prices will continue to climb in 2018, but at a slower rate than previously predicted, as would-be new homebuyers step back to assess the new law’s impact on their pocketbooks with their accountants.  From my personal view of the market, January has already begun strongly with multiple bids on a few good area listings.
Otteau has a few other reasons for (short term) optimism:

1 – The lower tax brackets will somewhat offset the elimination of deductions

2 – People buy homes for lots of reasons – schools, proximity to work, the freedom and pride home ownership provides, the vibe and culture of an area. Taxes rank lower on the ladder of reasons

3 – The economy has continued to improve (since the lows of 2009) – jobs up and unemployment still low

4 – Interest rates are forecast to rise this year and that will compel buyers to act before they rise higher.

5 – And finally Otteau believes the reduction in the corporate rate will compel more hiring.  I’m yet to be convinced of this one as I believe most of this money will end up with management and in company stocks.

Finally, and said long before Otteau was born, Owning is usually a far better long term financial strategy than renting.

Many locals and their municipalities have already begun taking measures to lessen the impact of this new bill.   South Orange and Maplewood among other towns have made pre-paying property taxes early simpler, but there are more ways to lessen the impact.  Below are six additional suggestions (see link – prep for new tax law – for more explanation of each measure).  Prep for the new tax law
1- increase charitable deductions
2- expenses, which include travel, professional dues, education costs, conference fees, cars and electronic equipment, can be deducted to the extent they exceed 2 percent of adjusted gross income.
3-medical
4-delay income
5-moving for work do it sooner
6-alimony
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Essex County Property Tax Comparisons

ESSEX COUNTY TAX CHART
Below is a chart of the average tax load paid by several county towns and the percentage of that tax that goes to the municipality’s school system.

The percentage of the state budget spent on education has grown from about 33 percent to about 38 percent during Gov. Chris Christie’s term.

The Governor’s property tax cap may have helped reduce the annual increase in New Jersey’s property taxes, but unfortunately taxes are still rising faster than the rate of inflation.

The link at bottom shows more Essex county towns and gives a bit more background.

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link to more info on NJ tax burdens

Tax Re-Assessment

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A reassessment of property values is now scheduled in 2016 in the townships of South Orange and Maplewood. The two towns are sharing some of the expenses of the reassessment to save money and the new values will be effective January 1 2017.

The revaluation will hopefully achieve the county’s and the towns’ goals of spreading the tax burden more fairly.  Assessed values have fallen below 85% of market values after three years of a hot real estate market featuring consistent growth in property values.

Maplewood’s last assessment was in 2012, after a full revaluation in 2010 and  South Orange had a full revaluation in 2008 and a reassessment occurred in 2011.   For more info visit the Essex County Tax Board.

http://www.essextaxboard.com/revaluations.html

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Property Taxes and the Marylawn property in South Orange

marylawnThe town of South Orange plans to put the Marylawn property on the tax rolls.

Marylawn of the Oranges Academy, 445 Scotland Road, closed in 2013 after operating as a private Catholic school for girls. The property is owned by the Sisters of Charity of St. Elizabeth and includes the school building and the Graves mansion, built in 1900.

The property is no longer being used for a religious school, so the trustees believe it should lose its tax-exempt status.  The property owners, the Sisters of Charity may be more motivated to sell the property once it is subject to property taxes.

Seton Hall University made an offer in March on the property but the proposal was withdrawn for a number of reasons.  After discovering that the property would not be purchased for use by another tax-exempt party, village officials put collecting property taxes on the table.

On one hand, the sisters are seeking a non-conforming use such as a developer who could build fairly large multi-unit building(s).  On the other, the Montrose Historical Society is hoping a developer will update and ‘save’ the historical property.  The town is in the middle and is hoping for a developer who could fit 5 to 7 single family buildings on the property that would be a conforming use (not require re-zoning).  For more details see the alternative press link.  For more background see my previous post from 2013.

http://thealternativepress.com/towns/south-orange-slash-maplewood/articles/south-orange-plans-to-add-marylawn-property-to-ta

https://kenkrasnerhomes.wordpress.com/2013/07/11/marylawn-saga-to-be-continued/

Deadline for Property Tax Appeals

 

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April 1 is the deadline for property tax appeals.   Here is the equation: Your tax assessment X municipal tax rate = your tax bill.

Your municipality assigns a town-wide rate that is not negotiable.  However, if you feel that your tax assessment is significantly high compared to other homes of comparable size, location and condition than you may have a chance at a successful tax appeal.

Contact a local expert – http://www.spectorfoerst.com/practice-areas/real-estate/property-tax-appeals/

 

 


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