As anyone who has bought a house has figured out at some point, there are a bunch of hidden costs to homeownership, including unplanned repairs, taxes, and insurance. Whether those things come as a shock depends on how much research you do before you buy. As CNBC reports, 33% of new homeowners reported in a 2023 survey that their property taxes were more expensive than they expected.
While property taxes are unavoidable, an unpleasant surprise is not. Here’s what you need to know to prepare for your tax bill—especially if you are purchasing a new build.
Educate yourself up front
Whether you’re buying a newly built or existing home, you should gather as much data as possible about your purchase and the true cost of ownership, from property taxes to insurance to HOA fees, rather than focusing solely on the sticker price.
Valerie Saunders, president of the National Association of Mortgage Brokers, recommends tapping the expertise of everyone, from your realtor to attorney to loan originator and mortgage broker, as they will be familiar with factors like the market you’re entering and how property appraisal works in your county.
“There’s so much information at our fingertips now, there’s no reason not to do your research,” she says.
Saunders notes that you can also find publicly available data about your property through the county tax assessor or property appraiser. Look up the website for your county and search for your lot (you may need the tax ID number from your sales contract) to see the current assessment. For new developments, this may consider land only, which means you can expect property taxes to be higher in the future once your home is included in the appraisal.
Look at what your neighbors pay
If you’re moving into a neighborhood or new development with other homes that are at least a year old, check the county data for what your neighbors pay in taxes. This may not be an exact reflection of your future bill—especially if square footage, amenities, or lot size are drastically different—but it can give you a starting point for what to expect.
You’ll also want to gather information about other expenses that can add to your monthly bill, such as HOA fees and recycling and wastewater management.
Set money aside for a higher bill
Saunders recommends having a plan for covering an unexpected tax increase, whether that’s allocating your income tax refund or putting money into a savings account every month.
Typically, you’ll put estimated property taxes into an escrow account when you purchase your home. But if your taxes are based on an assessment of land only when you close, the next assessment will almost certainly be higher, and you may end up with an escrow shortage. In this case, you’ll have to pay back your lender to cover the difference.
If you don’t have a lump sum already saved, consider calculating the worst-case scenario (how much you think your taxes will increase), dividing that dollar amount by 12, and setting that money aside every month to prepare for a higher payment. And don’t drain your savings for non-essential home improvements or purchases if you anticipate a tax increase.
Understand your county’s tax assessment process
While every county handles tax assessment differently, most reassess every year. Knowing the dates and deadlines for this process can help you plan for potential increases and be strategic about lowering your tax bill.
For example, any permanent structures added to your property will increase the assessment, so call your county office to get an estimate for the value before you build (you may want to hold off on construction until after the next reassessment). You may also qualify for certain exemptions that can lower your tax burden.
