What is a property tax assessment?
A County Tax Assessment is what your local government uses to determine property values. After an assessor appraises and compares the selling prices of similar homes, the value is determined. This information is used by the local government to set each year’s property tax rates.
What is the role of a tax assessor?
A County Tax Assessor is a local government official tasked with estimating property values within the county or city boundaries. The tax assessor must be trained and certified before they can start assessing the values of taxable assets. ‘Yes, but what is a county TA, and what do they actually do?’ you may be asking.
Even though “Tax Assessor” is in the job title, assessors don’t actually “set taxes rates.” Instead, they are solely responsible for “fairly determining property values.”
‘What does a tax assessor look for?’ you may ask. Assessors are graded on their performance. As a result, they are constantly looking to provide the fairest valuations possible.
This is achieved by looking at similar properties that have sold, comparing prices, square footage, age of the home/property, and the location. Depending on the regulations of the city or county, assessors may do valuations once a year to every few years.
How do tax assessors help determine property tax?
“Property taxes are calculated by taking the mill levy and multiplying it by the assessed value of the owner’s property,” Investopedia.com explains. Mill Levy or Millage Rate is just another term for property tax. The term applies to the property based upon the value the assessor has determined.
Investopedia.com goes on to explain that “The rate of the tax is expressed in mills and is equal to one dollar per 1,000 dollars of assessed value”. Ultimately, determining or calculating the property tax or mill levy involves “how much revenue each tax jurisdiction will need for the upcoming year to fund its budget for public services.”
Denvergov.org confirms that Denver 2020 taxes were calculated by factoring in “Denver’s combined general millage or Mill Rate.” Broken down further, Denver’s combined Mill Rate “including Denver Public Schools and Urban Drainage District is 74.195 mills or a tax rate of 0.074195 for every $1 of assessed value”. School districts and fire departments are major public services that are factor into the mill rate in every city and district. The mill rate is added to your annual property tax bill.
For example, the calculation that determines assessment vs property tax takes Actual Market Value (valuation made by the assessor) x Assessment Rate (rate is usually set yearly by Colorado State Legislature) x Mill Rate (Tax Rate decided upon by taxing authorities) = Property Taxes.
Tax Assessments: don’t confuse with home appraisals
One important distinction is that an assessed value is not the same thing as an appraisal value. For example, when a home goes on the market to sell, an appraiser determines the selling price. The appraiser takes a closer look at the features of a property and home to determine the price. This appraisal is the licensed appraiser’s idea of the home’s value. The appraisal price helps mortgage lenders know how much money the borrower will need to purchase the property.
What makes property taxes go up?
Depending on where you live, if the assessed value of your home goes up, your property taxes will also increase. In Denver, we have seen property values soar and competition getting fiercer. As a result, buyers are snatching up new homes as soon as they go on the market in Denver. The supply is less than demand, which often results in bidding wars.
If you’re a property owner in Denver or Colorado at large, you most likely have noticed home prices going up. As a result, your home’s value most likely has gone up, and as a result, so have your property taxes.
If you’ve updated your home with additions, renovations, or home improvements, the value of your home will have also gone up, thus affecting your tax rate. However, adding value to your home is a good thing, regardless of tax increases.
Whether you have added solar panels, a second bathroom to the first floor, or finished the basement, this increases the value of your home. Take, for example, that you may have the same square footage as another house in your neighborhood. You upgrade your home in some way and the appraiser evaluates your home at a higher rate than the other house. Thus, your house becomes more valuable.
Some home improvement projects like solar panels or medically required updates provide property tax exemptions. Depending on where you live, tax deductions are something you will want to look into when the time comes to make those home improvements. So be sure to look up what your city or county offers before you start. Doing so may help you save as much in the process.
Increased amount of homes for sale
An increase in homes selling in your area is an additional factor that drives up home value. These types of increases in sales are usually due to the desires of buyers to live in your location. For example, your neighborhood is now an attractive place to buyers because of factors like an influx of new job opportunities, better schools, gentrification, or better infrastructure in that zip code.
Denver has seen a lot of this in the past ten to fifteen years. The influx of people migrating to Colorado for job opportunities has caused home values to increase as a result dramatically. It doesn’t look like things will be slowing down in the year ahead, with so many people, natives and transplants alike looking to buy a home.
State and local budget
Another factor that impacts tax rates is the State and Local budget. Often, a state or city may cut funding which causes some budgeting constraints.
For example, let’s say your state has made budget cuts due to the effects of COVID19. The state decides to spend the money on widening the highway to combat increasing traffic jams. Your local government still must pay the bill, regardless of cuts at state and local levels. The natural course of action to make up for the new cost is to raise taxes, including property taxes.
Stay in the know
If you are a homeowner or about to become one, it’s a great idea to familiarize yourself with how your city calculates your property tax rate since each state handles them differently. Even if you recently moved to the state, getting familiar with how your new state establishes and maintains taxes will help you in the long run — making it worth your while to get a better understanding of property taxes.
Would you like to lower your costs, but your property taxes seem to be increasing? You may want to pursue a refinance. A refinance can help shorten your loan term so that you can pay your home off sooner. In addition, with rates still hovering at near-historic lows, you could get yourself a lower interest rate.
Are you looking to increase the value of your home? With a cash-out refinance, you can use the funds to pay for home improvements. You can also pay off high-interest credit cards, pay for college tuition, or even build up your retirement savings.
A refinance offers many possibilities, and our sister company, American Financing, can help! Check out their refinance calculator to learn more.