First inflation, Now Get Ready for Higher Property Taxes
Massachusetts homeowners! Brace yourself. Property taxes next year are likely to be higher, and the increase could be substantial.
Law Governing Property Tax Assessments (Proposition 2 ½)
In 1980, the state of Massachusetts enacted a law, Proposition 2 ½, which places strict limits on the amount of property tax revenue a town or city (community) can raise through real and personal property taxes in a fiscal year. This revenue is called a tax levy, or just levy.
The law established two types of levy limits: First, a levy ceiling which states a community cannot levy more than 2.5 percent of the total full and fair cash value of all taxable real and personal property in the community. Second, a levy limit which is the maximum amount a community can levy in a given year. Note the levy limit must always be below, or at most, equal to the levy ceiling. The levy limit may not exceed the levy ceiling.
That said, the law does allow communities to levy taxes above its levy limit or its levy ceiling on a temporary basis, as well as to increase its levy limit on a permanent basis. It’s this flexibility which concerns us and the reason why we wrote this article.
How Towns Increase Levy Limits?
In Massachusetts, towns are allowed to increase levy limits every year as long as the new levy limit doesn’t exceed the town’s levy ceiling. There are three ways in which a town can lawfully increase it levy limit:
Permitted Increases
Each year, a community’s levy limit automatically increases by 2.5 percent over the previous year’s levy limit.
New Growth
A community is able to increase its levy limit each year to reflect new growth in the tax base. New growth includes items such as home improvements, a return to the tax rolls of previously exempt properties, condominium conversions, etc.
Overrides
A community can permanently increase its levy limit by successfully voting for an override. The amount of the override becomes a permanent part of the levy limit base.
Should Homeowners be Concerned?
The first two items in the previous section (permitted increases & new growth) are typical adjustments made each year and should not create an undue burden or surprise for the homeowner/taxpayer. The third item (overrides), however, is a less used adjustment but could be employed as towns attempt to address their largest expense -- personnel costs.
Folks, local town employees (i.e., teachers, first responders, town officials, etc.) like the rest of us are getting hurt by the effects of inflation. It’s highly likely that these town employees will ask their employer for an increase in their wages/salaries to compensate for any loss in purchasing power. The burden, of which, will fall to you, the taxpayer. So get ready for a higher than average increase in your property taxes, because it’s coming.
Disclaimer: The views and opinions expressed in this commentary reflect Team Coyle’s beliefs and observations as of the date of publication. Team Coyle undertakes no responsibility to advise you of any changes in the views expressed herein. No representations are made as to the accuracy of such observations and assumptions and there can be no assurances that actual events will not differ materially from those assumed. The forward-looking statements in this paper are based on Team Coyle’s current expectations, estimates, forecasts and projections, and are not guarantees of future performance. Actual results may differ materially from those expressed in these forward-looking statements, and you should not place undue reliance on any such statements. These materials are provided for informational purposes only, and under no circumstances may any information contained herein be construed as investment advice. See also terms of use.
About TEAM COYLE
Team Coyle, a professional group of real estate agents at Compass, has more than ten years of experience helping individuals and families buy and sell real estate in the Greater Boston Region of Massachusetts (primarily MetroWest).
