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.

Proposition 2 ½ (Massachusetts Property Tax Law)

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.

Matt Coyle, Co-founder of Team Coyle, is a professional real estate agent at Compass, who specializes in helping individuals and families buy, sell, and invest in real estate in the Greater Boston region of Massachusetts. If you have more questions about this topic or our services, please contact us at teamcoyle@compass.com or visit our website at www.theteamcoyle.com.