Why Are New Jersey’s Property Taxes So High?

New Jersey is a great place to work and live. Its cities are often ranked some of the best places to live in the US, and the state is home to great restaurants and sports teams, not to mention there are plenty of job opportunities being centrally located to several large cities. But, there’s one thing that often comes up in conversation when talking about New Jersey: property taxes are high. Some of the highest in the country, in fact.

A study from the Tax Foundation found that in 2009, New Jersey residents paid median taxes of $6,579 in 2009, giving them the highest property taxes in the country. It’s no wonder why residents get so angry about having to pay high taxes, but the truth is that New Jersey is highly reliant on property taxes to fund schools and government. So, looking at property tax numbers alone isn’t enough to tell the full story. Other areas may be paying the same dollar amount of taxes, just in a different form.

Here are the factors that determine New Jersey taxes, according to NJLM:

  • Your home’s market value

  • Cost of municipal and county programs and services

  • Cost of local public schools

  • Availability of revenue to cover the above costs

  • Extent of tax exempt properties in your municipality

  • Total value of taxable properties in your municipality

So, if you were to make structural renovations or additions to your property, your tax bill gets higher. If it costs more to deliver local government services and programs to your area, your tax bill gets higher. If local school districts cannot count on other revenues and their costs rise, your tax bill gets higher. When looking at the numbers, it’s important to remember all of the programs and services that NJ taxes support.

Also, NJ municipalities are highly autonomous. This offers a range of benefits to residents, including more control over local school systems and government. But, this also comes with a cost, and that cost is reflected in NJ property taxes. The more emphasis you place on having local independence, the more the municipality is to going to have to pick up these costs, when in other states, they are funded at a state level. It’s a Catch 22, really.

Bottom line: No tax is popular. There will always be some aspect of taxes that people don’t like. At the end of the day, there are many government-level programs and services that our nation’s cities need to function.

Tips for the First Time Homebuyer

First-time homebuyers – those who have no present home ownership – are some of the luckiest in the market today. In order to stimulate a sluggish housing market, there have been a handful of incentives and loan opportunities that encourage those without a home to buy, in turn stimulating a down economy. Since the housing bubble, the market has been most generous to new buyers thanks to low housing prices and historically low interest rates. The drawbacks have been that lenders have tightened their lending guidelines, and there is a low inventory of homes available.

Why Buy?

Homeownership offers many benefits:

  • Increased control (no more cancelled leases)

  • A residence that better meets your needs

  • Home equity

  • Tax benefits

  • Builds credit

Below are a few tips for the first-time homebuyer.

  • Check the selling prices of homes in your area. For the most accurate data, you’ll need to look at the MLS, so contact a real estate agent who can give you access to this up-to-date, real-time system.

  • Use a mortgage calculator to determine how much you can afford each month. Overestimate your expenses so that you leave ample room to afford your mortgage and the hidden costs, such as HOA fees, property taxes and utility bills.

  • Find out what property taxes will be. There are big differences from one county to the next. Unfortunately, no matter where you live in NJ, you can expect to pay high taxes.

  • Determine how much closing costs will be. First-time homebuyers sometimes have more incentives than other buyers, so you may be able to get your closing costs paid for. Still, it’s not as common for these costs to be rolled into your loan as in years past, so know what you will have to bring to the table.

  • Work with a reputable realtor. A realtor is your best guide during the home buying process and will match you with the best properties, while also keeping you up-to-date on fluctuating interest rates and taxes.

  • Start the pre-approval process. A lender will look at your finances, qualify you based on your income and tell you how much home you can afford. Fannie Mae recommends that you spend no more than 28 percent of your income on housing, so take this into consideration. You want to afford your home, not make it a financial strain.