Money Management

Property taxes are an expense you must keep up with. Read on to learn why. 

When you buy a home, it’s not just your mortgage loan you have to worry about paying. You also have to keep up with additional expenses like homeowners insurance, maintenance, repairs, and property taxes.

The latter expense can be a huge burden, though — especially because it has the potential to rise over time. And in some parts of the country, property taxes can be prohibitively expensive.

In Alabama, the median property tax bill is $742, according to Motley Fool research. By contrast, in New Jersey, the median property tax bill is a whopping $8,928.

If your property tax bill has risen since you purchased your home, you may be struggling to keep up with it. Or, if your financial situation has worsened, you might be in the same boat.

Unfortunately, just as not paying your mortgage could result in you losing your home, so too could not paying your property taxes lead to a similar outcome. So it’s important to do what you can to keep up with those payments — or try to lower them.

When you stop paying your property taxes

Nolo reports that when you don’t pay your property taxes, the amount you owe can result in a lien being placed on your property. That lien then effectively makes your home serve as collateral for that unpaid debt.

Meanwhile, Nolo says that all states have laws that allow local governments to sell a home through a tax sale process to collect overdue taxes. So all told, if your property tax bill goes unpaid for long enough, you’ll risk losing your home.

How to scrounge up money to pay your property taxes

If you’ve fallen on hard times or are struggling to keep up with rising property taxes, and you don’t expect your situation to change for the better, then you may want to consider selling your home and moving to one whose property taxes are less of a burden. But if that’s not desirable, and you think you’ll be in a better place to cover your property taxes in time, then you may want to try borrowing money to cover a near-term bill.

One option may be to tap home equity you’re sitting on. A home equity loan can be a reasonably affordable way to borrow money, and the same applies to a personal loan (which isn’t based on home equity).

To be clear, though, borrowing money every quarter (or whenever your property taxes are due) to pay your property taxes isn’t a viable solution in the long run. It’s one thing to take out a loan to get through a rough financial patch, but you shouldn’t set yourself up to keep borrowing to cover those bills.

You may want to look at an appeal

If you’re struggling to afford your property taxes because they’ve risen a lot, it may be worth looking into appealing your property taxes. Doing so could get your bill lowered.

That said, to be successful in this regard, you’ll need to prove that the assessed value of your home is higher than what it should be. If you can’t find data pointing to comparable homes in your area having sold for less money than your recent assessment, then you may not be able to get your property taxes lowered.

The process for appealing property taxes can also be burdensome in some areas. You might have to pay a substantial fee and attend a hearing in court, which could cause you to miss work and lose income. So before you rush to appeal your property tax bill in the hopes of lowering it, you’ll want to make sure you have a solid argument.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
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Expecting a tax refund? Read on to see why you shouldn’t spend that money until it actually arrives. 

This year, tax refunds are expected to be lower than they were in 2022. And there’s a good reason for that.

In 2021, a number of tax credits (including the fairly well-known Child Tax Credit) were enhanced as a means of helping Americans cope with the pandemic. And so in 2022, a lot of filers saw larger refunds hit their checking accounts.

But because those pandemic-era benefits weren’t extended into 2022, tax-filers don’t have those higher credits to claim on their returns. The result? Smaller refunds across the board.

Of course, you may be happy to get a small refund this year rather than no refund at all. But one thing you don’t want to do is spend that money before it arrives.

Don’t count on your tax refund to arrive quickly or in full

A recent survey from Trustpilot found that 1 in 10 Gen Z and millennial tax-filers say they’ve already spent the money they’re expecting to get in refund form. But that’s a mistake you’ll want to avoid.

For one thing, it could take the IRS a longer than expected to process your taxes. Although the agency says it processes most refunds within 21 calendar days, there are factors that have the potential to delay your refund. These could include a mistake on your return that the IRS needs to reconcile, or filing on paper, which requires your tax return to be manually processed (and generally means you’ll be waiting a lot longer to get your money).

Now, let’s say you’re due a $1,200 refund, and you therefore rack up $1,200 worth of charges on your credit card thinking you’ll use your refund to pay off your balance. Well, if your refund is delayed, you might end up having to carry part or all of your balance forward until the money arrives, leading you to accrue interest.

What’s more, you might think you’re getting a certain refund amount based on what your tax return shows. But that doesn’t guarantee that the IRS will agree with your filing.

Say you received a 1099 from your bank reporting a bunch of interest income that you forgot to include on your tax return. The IRS might send you a notice that it’s adjusting your tax refund from $1,200 to, say, $900. But if you’ve already spent $1,200, you’re in a pickle.

It’s better to wait for that money to arrive

If you’re doing reasonably well in the savings department, you’re keeping up with your essential bills, and you don’t have any high-interest debt hanging over your head, then you may decide that you’re going to spend your tax refund in full. And that’s not necessarily a terrible thing.

But do yourself a favor and wait for that money to actually arrive before you spend it. That way, you can rest assured that you’re really getting the refund amount you think you’re entitled to, and you won’t have to worry about being late with a credit card bill due to a refund delay.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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If your homeowners insurance bill skyrocketed, you’re not alone. Here’s what you need to know. 

If you received your homeowners insurance renewal notice and were unpleasantly surprised by how expensive it is, you aren’t alone. Home insurance premiums jumped by nearly 13% on average last year and are expected to rise another 7% in 2023. And this is just the average — many homeowners are seeing even steeper increases.

I’m one of them. In fact, my homeowners insurance premium nearly doubled over the past two years, according to my renewal notice I just received in the mail. So, if you’re in the same boat as I am, here’s why your premium might have risen so rapidly and what you can do about it.

Why are your homeowners insurance premiums rising so fast?

Homeowners insurance premiums typically rise at about 5% per year on average, so the recent trends are certainly above the typical level of increases. But it isn’t that your insurance company is raising your premiums for no reason. In fact, a couple of major factors have caused the unusual surge in homeowners insurance rates.

Inflation

Inflation affects your insurance premiums in a few ways. For one thing, inflation makes the operating expenses of insurers rise, so this gets passed along to customers. And even more significantly, labor and building materials costs have risen dramatically over the past couple of years. From 2020 through 2022, the cost of residential construction materials increased by 34%. The biggest determining factor in your premium is typically the replacement cost of your home, so as that rises, so will the cost of insurance.

Natural disasters

The past few years have brought some costly natural disasters, including Hurricane Ida in 2021 and Hurricane Ian in 2022, and the past few years have been the most expensive ever for insurers. Insurers pass these costs on to customers, which can result in spiking premiums, especially in the most affected states. In fact, the Insurance Information Institute projects that premiums in Florida could increase 40% in 2023 alone, and the impacts of Hurricane Ian are the main reason.

Other factors

In most cases, the recent surge in homeowners insurance premiums can be attributed to the inflationary environment or recent natural disasters, but there are other factors that could be weighing on your insurance costs.

The age of your home is one example. For example, if your home is 15 years old, it’s more likely to experience a roof leak than a home that’s 10 years old. If you’ve had previous insurance claims, it can also have a big impact on your premium, especially if you’ve had multiple claims in the past several years.

What can you do about it?

The best thing to do if your insurance has spiked is to shop around for new coverage. You might be surprised at the range of price quotes you get on the same property from several different insurance companies. An independent insurance agent/broker who can get quotes from several different insurance companies could be a good place to start.

Another strategy is to ask your insurance company what you could do to reduce your premium. For example, some insurers give policy discounts for homes equipped with fire extinguishers and alarm systems. Some will give you a discount if you bundle auto insurance with the same company.

To be sure, given the inflationary environment and the recent wave of natural disasters, you may not be able to get your insurance premium quite as low as it previously was — especially if you live in a disaster-affected state like Florida or Louisiana. But comparison shopping for insurance is something people don’t do nearly enough, but could be a major money-saver if you do.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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