This is my favorite time of year. Football is in full swing and Thanksgiving is just around the corner. After eating too much with family and friends, we’ll burn some calories Black Friday shopping.
Then we get to eat candy and cookies and watch Christmas movies all through December. Every year, however, my Christmas spirit is a little dampened when our real estate tax bill arrives.
While I hate writing out that check, I remind myself that I positively love to live where I do and that check covers the awesome school my kids go to, it helps pay my wife’s teaching salary, it picks up my garbage, maintains my streets and pays the police to keep those streets safe.
Although it’s tough writing that check, at least we don’t have to worry about a “mansion tax.”
Like most states, Wisconsin municipalities assign a value to every home. The home’s value is then multiplied by the municipality’s millage, or mill, rate to determine the property tax. The term millage comes from the Latin word “millesimum” meaning “thousandth,” with 1 mill equaling 1/1,000th of a currency unit. So for property taxes, 1 mill is equal to $1 in property tax, meaning homeowners pay $1 of tax for every $1,000 of their home’s assessed value.
Likewise, if a home is sold in Wisconsin, a transfer fee is owed to the Department of Revenue. The transfer fee is $3 for every $1,000 of the home’s sales price.
Not every state has flat property taxes or transfer fees, however. Commonly known as a “mansion tax,” some states have additional taxes or fees aimed at expensive homes. The state of Washington is the latest to follow this trend. Starting in January, Washington homeowners will pay a transfer fee that increases based on the sales price of their home. Under the new rules, the transfer fee rate on properties that sell for more than $1.5 million will more than double, rising from 1.28% to 2.75%. Homes that sell for more than $3 million will have a 3% transfer fee.
Washington joins Connecticut, the District of Columbia, Hawaii, New Jersey, New York and Vermont as states that levy a surcharge on the highest-value homes or have a graduated real estate transfer tax system. New York’s mansion tax assesses a 1% tax on the purchase price for any home valued at $1 million or more. For homes valued at $2 million or more, there is a 1.25% tax, and those worth $25 million or more are taxed as much as 3.9%.
While $1 million would buy an unbelievable mansion in Kimberly, it’s less than the median price for a home in New York City. So the term mansion is sometimes overstated. For example, Vermont’s mansion tax kicks in for homes valued at $100,000 or more, which is well below the median national home price of $305,000.
Assessing a mansion tax will certainly generate revenue for those states that implement it – but only if people actually buy expensive houses. A home sold in Wisconsin for $26 million would result in a transfer fee of $78,000. That same home sold in New York would result in a $1,014,000 transfer tax, which is 1,200% higher. Some realtors fear the tax will have a negative impact on home sales.
So when my tax bill comes this year, instead of being sad, my heart will be filled with cheer because I could be living in a state that has a mansion tax. If that were the case, I would definitely be saying “bah humbug.”