IRVINE, CA—Certain factors are causing the effective tax rate to be higher on owner-occupied residential properties than on investment properties, ATTOM Data Solutions' SVP Daren Blomquist tells GlobeSt.com. According to a recent report from the firm that analyzed 2016 property taxes for more than 84 million US single family homes, owner-occupied properties register higher effective tax rate than investment properties.

The report revealed that average annual property tax for owner-occupied single-family homes nationwide was $3,658, an effective tax rate of 1.21%. That was higher than the average annual property tax of $2,437 and effective tax rate of 1.03% on non-owner occupied (investment) homes. The effective tax rate for investment homes was lower than the effective tax rate for owner-occupied homes in 34 states, including California, Texas, Ohio, Illinois and New York.

We spoke with Blomquist about this disparity in tax rates and the reasons behind it.

GlobeSt.com: Which factors are causing the effective tax rate to be higher on owner-occupied properties than on investment properties?

Blomquist: The markets attractive to real estate investors over the past five years of the current real estate recovery have largely been focused in the West and Southeast, which also happen to have the lowest property-tax rates in the nation. So, nationwide investor properties are skewed more toward areas with lower tax rates. The lower property tax rates may also be part of the reason investors are attracted to these areas.

Additionally, investors are often focusing on markets with the fastest appreciation over the past few years, which often results in a lower effective tax rate since the tax assessment value of homes is not keeping up with the market.This also may indicate that investor owners are more apt to dispute an assessment on their properties to try to lower the tax bill than owner-occupants are.

Lastly, it appears that many owner-occupant homeowners are not taking full advantage of the homestead exemption available to them that would lower their tax bill.

GlobeSt.com: What implications does this have for those considering buying a home for investment purposes?

Blomquist: The implication is that, at least from a taxation perspective, it may be a better to purchase an investment property rather than a home in which to live. Additionally, investment property owners can still deduct mortgage interest along with property taxes on their income tax, so it still benefits them from an income-tax perspective as well.

GlobeSt.com: What does it imply for those trying to decide between owning and renting a home?

Blomquist: Especially for those living in high-cost markets where buying a home is difficult, it may be a better investment decision to buy a rental property or properties in lower-cost markets with low property taxes instead. Although you don't get the benefit of having a place to live and will still have to pay rent, you'll still reap many of the other benefits of homeownership and experience those to a higher degree.

GlobeSt.com: How do taxes influence purchase choices for both types of owners (occupiers vs. renters)?

Blomquist: Property taxes are probably the second-biggest cost of homeownership after the actual price of the home. As such, they should be considered carefully before buying, whether buying an owner-occupied home or a rental property. In some cases, this may push someone to buy in a different state, particularly if they are buying a rental property. But tax rates can vary even within a local market from city to city, so buyers should take that into consideration when deciding in which neighborhood to buy.

We spoke with Blomquist about this disparity in tax rates and the reasons behind it.

GlobeSt.com: Which factors are causing the effective tax rate to be higher on owner-occupied properties than on investment properties?

Lastly, it appears that many owner-occupant homeowners are not taking full advantage of the homestead exemption available to them that would lower their tax bill.

GlobeSt.com: What implications does this have for those considering buying a home for investment purposes?

GlobeSt.com: What does it imply for those trying to decide between owning and renting a home?

GlobeSt.com: How do taxes influence purchase choices for both types of owners (occupiers vs. renters)?

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Why Owner-Occupied Homes Have Higher Taxes

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