Have you been looking to invest in Massachusetts real estate? There are many opportunities to take advantage of!
Massachusetts is known for having a strong and growing economy. If you make the right move, you could make the most out of the value of the property.
Before you get started, however, there are a few things you must keep in mind, whether you're a landlord, property manager, or other real estate professional or investor. One of the most important things you must evaluate before buying your property is Massachusetts property tax rates.
Property tax bills are a large funding source for many local/public services and resources, such as law enforcement, teachers, firefighters, etc.
As opposed to other states that have statewide measures to set a property tax rate, Massachusetts leaves property tax rates to cities and towns.
This makes the process for Massachusetts property tax rates slightly more complicated than usual. Don't worry, though; we're here to help.
This guide will walk you through property taxes in Massachusetts, including how they're calculated, when you have to pay them, and more.
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About Property Tax in Massachusetts
The first thing you should know about Massachusetts is that it has some of the highest property tax rates in the country. According to SmartAsset, the state's average effective tax rate is approximately 1.12%, which is higher than the national average of 0.99%.
Now, this doesn't mean that all cities/counties have the same tax rates. Hampden County, for example, has the highest property tax rate at 1.82%. Barnstable County, on the other hand, has an average effective property tax rate of 0.89%.
Massachusetts follows a similar calculation method for the property tax rate as other states.
You'll get your tax rate based on your property's assessed value and the local tax rate. This local tax rate will be expressed in $1 per each $1,000 of assessed value. You can expect the rates (also called mills) to be around 1%-2%, depending on the area.
Since the taxes for your property vary depending on the city or town, it can be complicated to tell exactly how much you'll owe before investing.
However, what you can do is compare the median property tax rates in the area you want to invest in, as well as the median home value of properties similar to yours.
When Do You Have to Pay Property Taxes in Massachusetts?
Local assessors in each county and town assess properties every year. As of January 1st, these assessors should classify all real property in the state. They can choose one out of these four classes:
- Open Space
Keep in mind that personal property is a separate classification that includes tangible items not considered to be a part of the real estate.
Property taxes in Massachusetts get billed on a quarterly basis. You'll get your bills in January, April, July, and October. You have 30 days to pay them after you get the bill.
Something important to keep in mind is that the first two tax bills are estimates based on last year's tax rate and the fair market value of the property. You'll get the current tax rate on your third tax bill.
According to the Government of Massachusetts, people used to pay the same tax rate before 1978. Now, it's up to each local government within the state.
What Are the Consequences of Late Payments?
If you don't pay your property taxes before the due date, you could get a tax lien. This allows the city or town to sell your property in an auction. The point of this is to recover the money that the government is owed.
Most of the time, you'll receive a demand letter soon after you miss your deadline. If you don't pay within 14 days of receiving that letter, the government may have the legal right to conduct a tax sale of your property.
You still have a chance to "redeem" your property even after the government conducts the tax sale. Keep in mind you would have to pay all the money you owe plus any other additional expenses/interest to get your property back.
Typically, people get six months to redeem their property. Once that period passes, the city/town or the person who purchased the property in the tax sale can file for foreclosure.
How to Pay Your Property Tax Bill in Massachusetts
You'll have to check your city or town to see which payment methods it accepts. Most areas in Massachusetts accept credit/debit card payments, as well as ACH transfers. You could also pay by phone, mail, or in person by going to your local tax collector's office.
How Much Is Property Tax in Massachusetts?
There's no statewide property tax rate, as each city and town is responsible for coming up with its own. Property tax rates will always be expressed as "number of dollars per thousand dollars of assessed value."
If your taxable property is assessed at $200,000, and your local tax rate is $10, you would have to pay $2,000 in property taxes every year. In Boston, for example, the 2023 tax rate is $10,74. This means that for an assessed value of $200,000, you'd have to pay approximately $2,148.
The fiscal year in Massachusetts starts on July 1st and ends on June 30th. Remember you'll get your current year tax rate on your third quarter tax bill.
How Is Property Tax Calculated in Massachusetts?
You'll get your property tax rates by multiplying your local tax rate (or mill) by your property's assessed value. This method is similar to the one other states like Rhode Island and Maine apply.
How do local assessors determine the value of your property, though?
There are three methods:
- Cost Method
- Income Method
- Market Method
Usually, you can expect to get the market method, which involves looking at market data and comparing the property with other ones in the area. You can appeal your tax rate if you feel like it was valued incorrectly.
Can You Lower Your Property Taxes in Massachusetts?
You may be able to pay less in property taxes in a few cities and towns. It depends on whether you apply for certain exemptions. You could also request a reassessment of your property's value.
About Proposition 2½
Proposition 2½ limits the amount of property taxes a city or town can raise. A city/town, for example, can't raise its taxes more than 2½ of the full cash value of all taxable property.
Furthermore, the rise in property taxes can't be more than 2½ from year to year, unless it's for new growth cases.
About Property Tax Exemptions
Certain taxpayers may apply for exemptions, depending on where they live. Some of these exemptions include:
- Elderly People
- Blind/Disabled People
Even though there are no statewide measures to set property tax rates, the process of telling how much you'll pay isn't too complicated once you know the formula.
Make sure you review your local guidelines and tax rates, as well as write down your assessed property value. This will help you calculate what you owe easily.
If you're looking for more tips on property management accounting, check out our whitepaper on the best tips for simplifying this complex process.