Maintaining real estate in the United States: taxes, expenses and utilities

The costs associated with real estate in the United States are highly dependent on location - state, city, and even county. Regardless, utility bills, annual taxes, and insurance can hit your wallet significantly. In this article, we'll take a look at how much you have to pay for housing and what kind of income you can earn, as well as the specifics of property management, renting, and selling.

Buying real estate in the USA

When it comes to buying real estate in America, the country of residence of the owner does not play a big role - annual property taxes and rental income are usually calculated according to the same rules. The exception is when selling an expensive investment property that has not been used as a primary residence.

Real estate taxes

Property owners in the United States are required to pay an annual property tax, which, on average, is 1-2% of the value of the property. These funds are used to maintain local infrastructure such as schools, daycare centers, libraries, fire and police stations, as well as roads, parks and recreation areas. Tax rates vary from state to state, city to city, and neighborhood to neighborhood and may depend on the level of infrastructure development.

Peculiarities of location selection

When choosing a location to purchase real estate, it is important to consider not only the tax rates, but also your own situation. For example, if you have children, choosing a location with a higher tax rate may secure a public school place for them, saving you money on private education. If you don't have children and spend most of your time at home (for example, as a freelancer), you may want to consider options with lower tax rates.

States with the highest tax rates:

1. New Jersey

   • Tax rate: 2.35%

   • Average home value: $315,900

   • Average tax amount: $7,410

2. Illinois

   • Tax rate: 2.30%

   • Average home value: $173,800

   • Average tax amount: $3,995

3. New Hampshire

   • Tax rate: 2.15%

   • Average home value: $237,300

   • Average tax amount: $5,100

4. Connecticut

   • Tax rate: 1.97%

   • Average home value: $270,500

   • Average tax amount: $5,327

5. Wisconsin

   • Tax rate: 1.96%

   • Average home value: $165,800

   • Average tax amount: $3,248

States with the lowest tax rates:

1. Hawaii

   • Tax rate: 0.27%

   • Average home value: $515,300

   • Average tax amount: $1,406

2. Alabama

   • Tax rate: 0.43%

   • Average home value: $125,500

   • Average tax amount: $543

3. Louisiana

   • Tax rate: 0.49%

   • Average home value: $144,100

   • Average tax amount: $707

4. Delaware

   • Tax rate: 0.54%

   • Average home value: $231,500

   • Average tax amount: $1,243

5. Washington, D.C.

   • Tax rate: 0.56%

   • Average home value: $475,800

   • Average tax amount: $2,665

Source: USA Today news outlet

However, as stated earlier, this does not mean that this rate applies to the entire state: each city and county has different tax percentages. To realize the differences, you can consider, for example, the property tax rates in different parts of Dallas.
When to pay taxes
You must file a tax return and pay taxes by April 15 of the year following the reporting period.
Features
The deadline to file and pay taxes is automatically extended to June 15 if you permanently reside and work outside the U.S. and Puerto Rico (as of April 15).
There is an additional extension to October 15 if you submit the special form by April 15 (or June if you meet the specified conditions).
Two-family home
It is necessary to file a tax return and pay taxes by April 15 of the year following the reporting period.
Calculation of tax amount
The appraiser determines the average market value of the property, which is reviewed every two to three years. However, each year the owner is given the opportunity to request a review of this amount. What matters is not how much you paid for the home, but how much it is worth on the market.
Example. You bought a home for $450,000 in New Jersey and the appraised value is currently $510,000.
To calculate the tax, approximately one-third of the assessed value is taken (this can vary from 10% to 33% in different counties). Thus, the starting point would be $170,000.
Then a coefficient is used, which depends on the price of the property. It can be equal to 100% (in which case the amount will remain unchanged), be lower (if the property is in an expensive neighborhood) or higher (if the property value has decreased). Let's assume in this case the coefficient is 70%, which equals $119,000.
Then consider the exemptions that may apply to retirees, military personnel, low-income people, and those for whom the property is their primary residence (homestead exemption). Suppose the latter condition applies in this case and the exemption is $9,000. This means that after deducting the homestead exemption, the amount would be $110,000.
In the final step, this amount is multiplied by the local tax rate. In the state of New Jersey, it is 2.35% (but in specific counties may be higher or lower). In this case, taking into account the rate, the property tax to be paid annually would be $2,200.

Utility costs

Utility costs in the United States can vary significantly not only between different states, but also within each city. This is especially true for the cost of electricity, parking lot rent, and various government subsidies. Utility costs include the cost of home maintenance and, with the exception of insurance, property taxes (if you own a home). In states with higher minimum wages, such as California, the District of Columbia, and Massachusetts, these costs may be higher.

Payment Methods:The customers themselves report the meter reading information to the supplier and are then billed. Payment is mostly done online through a personal bank account or the website of the management company, and payment by mail is also possible. Long queues at banks to pay utility bills are almost unheard of.

Interesting points:

• Some companies include information on energy “consumption” in their bills, comparing it to neighbors (anonymously) or state averages. This helps customers assess their resource efficiency, which is consistent with energy conservation policies. Utility companies also provide different packages and rates, such as nighttime or “unpopular” hours.

• Electricity:The cost of electricity can vary significantly from state to state. The average rate per kilowatt hour is about $0.13. Some states, such as Connecticut and Hawaii, have higher rates than others, such as Texas and Washington. Electricity consumption also depends on climatic conditions, and in the summer, especially in hot states, consumption can increase significantly.

• Gas and heating:The cost of natural gas and heating depends on the availability of central heating and the particular state. In central states, where central heating is more common, the cost may be lower than in northern states. In homes with central heating, heating fees are usually fixed and included in the rent. In homes with individual heating systems, heating costs can run $80 to $100 per month.

• Water and sewer:The cost of water and sewer is relatively low, but can vary from state to state. The average cost per cubic meter of water is about $0.6. Sewerage costs extra and can range from $15 to $30 per month.

• Television, telephone, internet:A package of services including TV, phone and internet can cost $100-150 per month, but in more expensive regions such as New York, prices can be higher. It is noted that Americans often watch TV and use home phone more often than mobile devices.

• Garbage Removal:The cost of trash removal can vary depending on the home, state, and number of people in the apartment, but is typically $17-35 per month.

• Insurance:Real estate insurance in the United States is common but not required.