Are you and your spouse considering a change in your living situation? Many empty nesters and soon-to-be retirees start thinking about downsizing their homes. It’s an exciting prospect but comes with important financial considerations, particularly regarding property taxes.
As you prepare to sell your home and buy a smaller one, knowing how this move will affect your finances is crucial. Many couples in your situation assume downsizing means lower taxes. But the reality can be more complex.
Your new tax bill will depend on various factors, from the location of your new home to its assessed value. Knowing how your property tax might change when you downsize is essential for making an informed decision.
Key factors
Downsizing usually leads to lower property taxes, but this isn’t true for everyone. Several factors can come into play, including:
- Location: Moving to a different town might mean a different tax rate.
- Assessed value: A newer, smaller home might be valued higher than your older, larger one.
- Tax exemptions: You might qualify for new exemptions in your new home.
Check with your local assessor’s office about available exemptions, such as the senior tax exemptions.
What else to watch out for
Downsizing can free up equity for retirement and reduce maintenance costs. But it can also increase tax payments due to:
- Higher tax rates in desirable areas
- Planned reassessments or rate changes
- Special assessments for specific services
With diligent research, you’ll be better able to find a new home that suits your lifestyle and long-term financial goals. You may also consider consulting a residential real estate attorney who can further explain local property tax laws, like tax limits and collections.
Downsizing later in life is more than just moving to a smaller space. It’s about preparing for the next phase of your life. Ensure your concerns get addressed before making your move.