Should Soaring Property Taxes Drive You to Move?

Rising property taxes can be a major burden for homeowners. At what point should you stop paying them?

When my husband and I bought our home about 12 years ago, we knew there would possibly come a day when our property taxes would equal or exceed our mortgage payment. And sure enough, that day came pretty quickly.

We live in New Jersey, which has the dubious distinction of having the highest property taxes in the nation. And because we bought a new construction home, we were hit with a pretty substantial tax bill from the start.

But through the years, our property taxes have climbed considerably, so much so that since moving in, they've risen $8,000. Next year, they're likely to rise even more, with home values increasing across the board.

Over the past decade and change, my husband and I have contemplated moving to escape our high property taxes. If you're now thinking of doing the same, here's what you need to know.

Is your property tax hike temporary?

Property taxes are calculated by taking a home's assessed value (which is effectively its market value) and multiplying it by its local tax rate. Local tax rates vary from town to town and can change from year to year, as can home assessments. It's more common for home assessments to fluctuate substantially than tax rates themselves.

Right now, home values are up across the U.S., so many homeowners are seeing their property tax bills climb. If that's happened to you, you may be inclined to pack up and move someplace where property taxes aren't as substantial. But before you do, you may want to sit tight for a year or two and wait things out -- especially if you're otherwise happy with where you live.

Even if you move to a part of the country with lower property taxes, you're likely to pay much more now than you normally would due to increased home values. But if you wait a couple of years, there's a chance home prices will start to fall, at which point your property tax bill could decline.

Another thing to keep in mind is that while your property taxes may have risen, if you live someplace where home prices are relatively low, that could help negate those increases. If you move elsewhere, you may end up with a lower property tax bill, but you could also end up having to pay more for your home itself, thereby negating that savings.

Now if you live in a part of the country where property taxes are always high (like I do), that's a different story. In that case, relocating could be a smart move if you're tired of spending a small fortune on taxes. But if you're looking at more of a sudden, temporary tax hike, you may want to wait things out.

Making the right call

Tempting as it is to abandon the state of New Jersey and move someplace where property taxes are more reasonable, my husband and I have our reasons to stay -- at least for now. But if you're not particularly tethered to your area and have seen a continuous uptick in property taxes, then it may be time for a change.

Remember, though, even if you manage to find an area where home prices and property taxes are less expensive, you may end up sacrificing other things in the process, like proximity to family, friends, your job, and the local amenities you've come to love. Before you let your frustrations over rising property taxes prompt you to move, you may want to examine your budget and see if there's a way to make them more manageable.