By Diane Saatchi
This April was the first tax season where homeowners’ taxes were affected by tax reform.
And people felt it.
I’ve been helping people buy and sell homes in the Hamptons for about 30 years, and I can tell you that a property’s taxes used to be one of the last questions that came up, well after whether we’re north or south of the highway and whether we can add a pool.
But now it’s one of the first questions customers ask: What about the taxes?
Under the Tax Cuts and Jobs Act of 2017, homeowners are allowed to deduct no more than $10,000 in state and local property taxes per year. This cap only really affects taxpayers who itemize instead of taking the standard deduction, so in some markets, this change wasn’t terribly dramatic. But according to Pew Charitable Trusts, the average tax deduction in New York overall exceeded $15,000 in 2015. And in the Hamptons, where homeowners often have more than one property tax bill, it’s no surprise that tax reform is making waves.
Currently, East Hampton Village and Sag Harbor Village have the highest taxes per relative market value of property. Sagaponack and Bridgehampton have lower taxes, but the thing to remember about taxes is that they change over time. Even if you buy a house in an area with relatively low taxes, there’s no guarantee they’ll stay that way.
The other thing to remember is that sale prices and tax costs have a tendency to even out. All things being equal, the same size and age home in a lower taxed location will be more expensive than if it were in a higher tax location. Let’s say you find a perfect house for $5 million but you choose not to buy it because the taxes are so high. Chances are a similar home in a lower-tax area may cost more. In most cases, it would take years of paying lower property taxes to make up the difference in sale price, but few people consider that calculation.
There is one thing homeowners can do to lessen the blow of property taxes. In most towns in New York State, the fourth Tuesday in May, every year is set aside as Tax Grievance Day. Tax Grievance Day in the towns of Southampton and East Hampton is the third Tuesday in May.
Even if you aren’t particularly concerned with your tax bill, any property owner with a home listed for sale has a good reason to try and get their taxes lowered: It will make the house more attractive to buyers.
It’s not too late to grieve your taxes, and there are a few ways to do so.
If you own property in the Hamptons, you’ve probably already received mail solicitations from tax reduction services. Using such services is one way to go. It will save you time but if successful, the service will cost a fee based the amount of tax saved.
Or, for a flat, one-time fee, a local appraiser can assess the value of your property and let you know if it is taxed too high. If you learn your tax is too high, you can file a grievance.
If you go the do-it-yourself route, follow these hyperlinks for specific instructions: East Hampton and Southampton towns (which include the villages and hamlets of Watermill, Sagaponack, Wainscott, Amagansett, Montauk, and Sag Harbor). Once you’ve filed a grievance with the town tax assessor's office, you’re given a date to make your case. Note: Southampton offers an online option; East Hampton does not. You’ll have time to make your case, with or without the help of an appraiser.
Not yet a homeowner? You may miss 2019 Tax Grievance Day. If the tax of a home you would like to purchase seems high compared to other similar homes in the neighborhood, there is a good chance you will be successful come 2020 Tax Grievance Day. The actual sale price is strong evidence of its value. Property tax is public record, and as such it’s easy to find out what others’ homes are taxed. You can Google, for example, “Town of Southampton, NY and Tax Roll.” Or, ask any real estate agent to help.
If you find this topic particularly interesting and want to learn more, New York State Department of Taxation and Finance recently updated its site.
© 2019 Diane Saatchi