The state of New Jersey has just released tax rates for every municipality in the state. Before you look at the chart below, can you guess which Bergen County towns have the highest and lowest property taxes?
Ok, now you can look. If you guessed "Paramus" has the lowest, you would be partially right. While it's eighth on the list, it qualifies as the lowest taxed borough with affordable home prices. Alpine, Saddle River, Englewood Cliffs, Rockleigh, Edgewater and Franklin Lakes all have an average list price above $1 million. (Teterboro essentially has no single family homes.) In Paramus, the average list is in the $600k range.
On the other end of the spectrum with an effective tax rate more than five times higher than Alpine's is Bogota. The general tax rate in Bogota is 3.630 and and its effective tax rate is 3.222.
What's the difference between the two rates?
The general tax rate doesn't take into account that your home's assessed value is not equal to its market value. If your tax rate is high but your assessed value ratio is low, your taxes aren't as high as you think they are - you're not being taxed on the full value of your home!
So if you're comparing tax rates between towns, use the effective tax rate.
The equalization ratio in the chart is simply an average of the area's assessed value divided by the market value. The general tax rate is multiplied by the equalization ratio to get the effective tax rate. (Also see this video on comparing tax rates.)
For tax rate info on other counties in New Jersey, click here.
If you're thinking of buying in Bergen County, call me for a consultation. I'll give you an overview on how taxes and other factors such as quality of schools, commuting options and population density should figure into your buying decision.
Author: Michael Shetler