Yahoo Finance How Much Do Millionaires Spend on Property Taxes and Maintenance?
Curious how much wealthier residents shell out for secondary homeownership costs like property taxes and home maintenance?
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It depends on many factors of course, but here are a few patterns and extra costs you may not have considered.
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What Do Millionaires Pay in Property Taxes?
“Property tax bills for millionaires also tend to be much higher than those of middle-class families,” said Michael Collins, CFA and founder of WinCap Financial. “The exact amount will depend on the location of the home, as well as its value.
“In some areas with high property values, millionaire families may pay tens of thousands of dollars in property taxes each year. Other factors that impact these bills include the age and condition of the home, any homeowner association fees or dues, and the cost of labor in that particular area.”
Colton Pace co-founded Ownwell, a company that helps homeowners lower their property tax bills. “In the states that Ownwell operates in (Texas, California, Washington, Georgia, Florida, Illinois and New York), the average property tax bill of homes worth less than $1 million is $4,254. The average property tax bill of all homes worth more than $1 million, but less than $10 million, is $19,208.”
Do Millionaires Pay a Lower Property Tax Rate?
Pace had plenty of data for comparing property tax rates at Ownwell. “The median percentage tax rate of homes worth less than $1 million is 1.35%, while the median property tax rate of homes worth $1-$10 million is 1.13%.”
How is that possible? “Wealthier families are more likely to utilize tax appeals and tax exemptions, the types of products Ownwell helps all types of property owners with.”
Collins also noted millionaires are more likely to take action to reduce high tax bills. “I have noticed that taxes can play a significant role in a millionaire’s decision-making when it comes to purchasing or maintaining a home.
“In high-tax states or areas with rapidly increasing property values, some clients have chosen to sell their homes and relocate to lower-cost areas. Others have opted for tax mitigation strategies such as creating trusts or gifting shares in their properties to reduce their overall tax burden.”
But millionaires can’t always lower their property tax bills. Scott Sturgeon, wealth advisor and founder of Oread Wealth Partners, has seen many wealthy clients pay high rates. “Wealthier clients tend to live in areas of the country where property taxes are likely higher, especially at the local level. With that might come better schools, more manicured parks or public spaces, and so on.”
“Interestingly,” Sturgeon went on, “some of the states without income taxes simultaneously tend to charge high property taxes. That’s something that commonly gets overlooked.”
How Much Do Millionaires Spend on Maintenance?
Collins has seen his clients spend a pretty penny on home maintenance costs. “The average home maintenance and repair costs for millionaire families can vary greatly depending on the size, location, and value of the home. However, it is safe to say that these costs are significantly higher than those of a middle-class family,” he noted.
“Some estimates suggest that millionaire families can spend upwards of $30,000 per year on home maintenance and repairs,” Collins continued. “This includes regular upkeep such as landscaping, cleaning services and general repairs as well as larger projects like remodeling or renovations.
“The very wealthy may prefer to hire full-time staff to handle all aspects of maintaining their homes. Others opt for more affordable options such as hiring contractors or using online platforms to find independent workers for specific tasks.”
Beware of Other Related Costs
“Homeowners association dues can be a pretty significant expense that comes along with certain higher-end homes or properties,” added Sturgeon. “You often see this with luxury condominiums or planned developments that offer a lot of amenities.”
Homes in HOAs don’t just cost more in dues. The bylaws require specific maintenance and repair standards, which sometimes force homeowners to spend more on upkeep than they would have otherwise.
Sturgeon pointed out that more expensive homes come with more expensive insurance premiums. “[Costly homeowners insurance] applies to areas prone to natural disasters. Policies can be really hard to find and really expensive.”
Don’t Forget Vacation Homes
Multi-millionaires often own multiple homes — each with their own maintenance, property tax, and insurance costs.
“A lot of higher net worth individuals have multiple homes, some of those in areas that are vacation destinations subject to higher upkeep costs,” said Sturgeon.
“For example, a vacation home in fire-prone areas like parts of California or Montana might have really expensive homeowners insurance given the heightened fire risk, he continued. “A vacation home in Florida might also be rented out part of the time which is going to increase wear and tear on the home. That’s on top of heightened hurricane risks and increased maintenance costs that come from beachfront property. Turns out saltwater is pretty corrosive on things like AC units.”
The Bottom Line
More expensive homes come with more expensive bills. Before running out and splurging on an expensive home the next time you get a pay raise, make sure you calculate out all the ancillary costs of ownership. You may not like what you find.
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