Many factors go into choosing the right home, whether it’s a starter home for a young family, a “step up” for a family whose size and salary are growing, or a retirement home for those who are looking for a place to relax and enjoy life. One of the benefits of selecting a real estate company to help guide you through the decision-making process is that you are hiring a professional team, one which knows the right questions to ask, which answers are the right ones, and the best courses to take to ensure a good result. Movoto is a national company that specializes in matching families with the property which best fits. Look on Movoto for the most up-to-date information for Memphis, TN.
Slightly less than one out of 10 residents of Tennessee live in Memphis, the largest city in the state with a population of just over 650,000 (Tennessee population 6,549,000). With almost 13% (12.79%) of its residents older than 60, and that number steadily increasing, Memphis is ranked as the number two destination for millions of baby boomers who may looking for the best place to retire. The top three criteria on virtually every “where to retire” list include a pleasant, mild climate, low cost of living, and a favorable tax rate.
Seniors aren’t the only group contributing to the growth Memphis is undergoing. Young professionals have been relocating to the city, and have become the second largest age grouping according to the latest census data. The two most often cited criteria for this group also include a low cost of living and low tax rates.
Yet Memphis has the 13th highest property tax rate in the nation. In fact, Memphis’ tax rate is the highest in the south. There is, however, an explanation. Memphis residents actually pay fewer dollars in taxes than over 95% of the nation’s homeowners.
How is Memphis’ Property Tax Calculated?
You don’t have to be a math genius to calculate property taxes for the city. First off, the state of Tennessee does not have a property tax. Zero is easy to calculate. Shelby County, which includes all of Memphis, taxes property at $4.37 per $100 of appraised value; but only the first 25% of the appraised value is subject to the tax. Sound complicated? It’s really not. Assume your house’s appraised value is $300,000. You would be taxed on 25% of that value, or $75,000. Since the rate is per $100 of value, you then divide $75,000 by 100. The result is 750; that is the number that will be multiplied by $4.37, to arrive at the amount of taxes owed to Shelby County, $3,277.50.
Memphis has an additional tax rate of $3.40, which is also based on 25% of the appraised property value. By following the same formula, the Memphis taxes of $2,550 would be added to that of Shelby County, making your total property taxes for a $300,000 home $5,827.50.
Why is Memphis Advertised as a Low Tax Area?
Property taxes are only one of the several taxes individuals and families must pay. While Memphis does have a higher rate than all but 12 major cities, the median home price is 46% lower than the national average. In dollars and cents, that means that the same home that is valued at $300,000 in an average city is valued at only $138,000 in Memphis. Your property taxes would be only $2,680.65, saving you $3,146.
The amount you would end up paying in property tax for a home worth $300,000 in a city whose homes appraise at the national average drops the Memphis ranking all the way from the 13th most expensive to 45th in terms of comparison. This makes the effective tax rate for Memphis very attractive for homeowners as well as for those searching for a home. The study cited is conducted annually by the Lincoln Institute for all 53 major cities in the nation.
What About Other Taxes?
In addition to Memphis’ favorable comparison to other cities with respect to property taxes, Memphis residents enjoy other tax advantages as well. Tennessee is one of only 10 states in the nation with no personal income tax, which means that Memphis residents pay only federal income tax, property tax, and state sales tax. Other taxes levied in some states, such as the personal property tax assessed on automobiles, which can amount to thousands of dollars annually are not collected in Memphis, or in Tennessee. It is easy to see why young families just starting out and seniors who are often living on fixed incomes are attracted to the city.
Are There Any Other Taxes to Consider?
The state sales tax in Tennessee is set at seven percent, and the city of Memphis adds another 2.25%, making all sales subject to a 9.25% sales tax. This is slightly higher than all other states. However, as the cost of living in Memphis is significantly lower than the national average (by 16%), the higher sales tax rate is more than offset by the lower cost of goods and services.
Memphis is becoming home to families on both ends of their working careers, those young families just entering the workplace, and baby boomers searching for the right retirement location. In addition to enjoying a mild climate and relatively low cost of living, Memphis has one of the lowest effective tax rates in the nation, a major factor in its continued growth.
2 Point Highlight
In addition to enjoying a mild climate and relatively low cost of living, Memphis has one of the lowest effective tax rates in the nation, a major factor in its continued growth.
This makes the effective tax rate for Memphis very attractive for homeowners as well as for those searching for a home.
