Where Inflation is Causing Property Taxes to Increase the Most
Some states are raising property tax rates to the maximum allowed by law. Is your state on the list?
Some states have laws that allow inflation to dictate higher property taxes. That’s because revenue from property taxes is used to fund police and fire departments, maintain roads, and other initiatives that benefit the public. And when inflation is high, like it is right now, these initiatives require more money to operate.
For example, the increased cost of living requires salary increases for public workers. So, localities raise property taxes to provide those higher salaries, allowing residents continued access to public services.
Here are some areas in the U.S. where inflation is causing property tax rates to increase to the maximum amount allowed by law.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Higher property taxes in Michigan
Michigan homeowners are facing the highest property tax increase in 28 years, at 5%. But that increase is less than it could have been. That’s because under Michigan law, property taxes can increase by 5% or the rate of inflation, whichever is less. The inflation rate in 2022 could have caused tax rates to jump by nearly 8% in 2023.
This isn’t the first year Michigan homeowners have run into inflation-related tax increases. Pandemic-related inflation, largely due to supply chain issues, increased in 2021. That spike resulted in higher tax levies in 2022. But at 3.3%, the property tax increase didn’t come close to reaching the maximum tax hike of 5% allowed by Michigan law.
Maximum property tax increase in New York
New York is another state that bases property tax increases on the consumer price index (CPI). And thankfully, the state also has a property tax cap. Property tax levies max out at 2%, but this cap can be overridden by school and local governments.
Unfortunately, many New Yorkers are accustomed to this increase since 2023 marks the third consecutive year inflation rates have surpassed the 2% tax cap.
South Carolina property taxes
Taxing jurisdictions in South Carolina (for example, school districts and counties) can raise tax rates in accordance with inflation and population increases, according to the South Carolina Revenue and Fiscal Affairs Office. And counties across the state are raising taxes.
- Lexington County, SC recently approved a 5% property tax increase for the first time in ten years.
- Horry County, SC also increased property rates in order to keep up with inflation and population growth.
Property taxes in Washington
In Washington, some taxing districts (localities, such as towns) can raise property tax levies above the maximum allowed if they have any “banked” dollars from not taxing the maximum amount in previous years. Here are a few examples.
- The Orcas Cemetery District increased its tax levy 20% from 2022 to 2023.
- The Town of Friday Harbor increased the tax levy 30.8% from 2022 to 2023.
Voter approval isn't needed for local taxing districts to “play catch-up” on property tax levies. So, Washington homeowners could see significantly higher tax bills, even if they live in an area where local jurisdictions previously imposed lower taxes.
Home values and high property taxes
Inflation isn’t the only factor that drives higher property tax bills. Home values also contribute to property tax amounts. For example, Californians receive some of the highest tax bills in the country, despite the state imposing one of the lowest property tax rates. This is due to the generally high home prices in California.
And even if you don’t live in a state that is raising tax rates, you could experience higher tax bills. Making renovations to your home can increase the taxable value of your property, which can also increase your tax bill. And rising home prices can increase your property taxes, whether you make improvements to your home or not.
To continue reading this article
please register for free
This is different from signing in to your print subscription
Why am I seeing this? Find out more here
Katelyn has more than 6 years’ experience working in tax and finance. While she specializes in tax content, Katelyn has also written for digital publications on topics including insurance, retirement and financial planning and has had financial advice commissioned by national print publications. She believes that knowledge is the key to success and enjoys helping others reach their goals by providing content that educates and informs.
-
How to Assess the Impact of Your Charitable Giving
Here are five simple ways to 'do this, not that' when trying to find out from a nonprofit what kind of impact your donations are having.
By Catherine Crystal Foster Published
-
How a Two-Year Installment Sale Strategy Can Save on Taxes
When selling property or other substantially appreciated asset, you could spread the taxes over two years to save big bucks. Following the rules is critical, though.
By Derek A. Miser, Investment Adviser Published
-
'Instant' EV Tax Credits Are a Hit: $580M Paid This Year
EV Credits Claiming federal electric vehicle tax credits at the point of sale is a new and popular option in 2024.
By Kelley R. Taylor Last updated
-
Retirees Face Significant Tax Bills Due to Fraud
Fraud A new report sheds light on how older adult scam victims end up with big tax bills and lost retirement savings.
By Kelley R. Taylor Last updated
-
Tax Day: Is the Post Office Open Late?
Tax Filing Tax Day means some people need to mail their federal income tax returns.
By Kelley R. Taylor Published
-
High Earners: Beware of These Illegal Schemes to Lower Taxes
Tax Schemes The IRS says high-income filers are targets for several illegal tax schemes.
By Katelyn Washington Last updated
-
Mailing Your Tax Return This Year? What to Know Before You Do
Tax Filing There are plenty of reasons not to mail your tax return this year, but here’s what you should know if you are.
By Katelyn Washington Last updated
-
IRS Warning: Beware of Smishing and 'Helper' Tax Scams
Scams Tax season is a time to look out for email and text message scams.
By Kelley R. Taylor Last updated
-
Most Expensive States to Live in for Homeowners
Property Taxes High property tax bills make the places on this list the most expensive states for homeowners to live in.
By Katelyn Washington Last updated
-
Don’t Miss This $2,500 Tax Break for Paying Your Student Loan
Tax Deductions Do you qualify for the student loan interest deduction this year?
By Katelyn Washington Last updated