What IS “Property Tax”?
Property taxes are used to pay for local government services. In 2017, just over 50% of property tax revenues were used to fund local K-12 school districts; the remainder supports local services provided by counties, special districts, and, to a lesser degree, cities and towns (which are primarily funded by sales taxes), including fire protection, recreation, water and sewer infrastructure, libraries and county road maintenance.
DID YOU KNOW…
…Property taxes don’t pay for state services.
Property taxes in Colorado are assessed, collected and spent locally. Colorado has not imposed a state level property tax since 1964, and therefore property tax revenues do not pay for any state services like highways, prisons, or higher education; state services are paid for through a combination of the state income tax, the state sales tax, motor fuel taxes fees and other tax revenues. Although 36 states levy a property tax, this funding source represents only 1% of their own-source general revenue.
How is your property tax calculated?
Your property tax is calculated by multiplying the ASSESSED VALUE of your property by your local MILL LEVY (tax rate).
(Click on the blue boxes below to understand the components of how your property tax is calculated.)
Assessed Property Value
Your property’s taxable value is the “MARKET VALUE” multiplied by an “ASSESSMENT RATE”.
The MARKET VALUE of your property is established every other year through a “reassessment” process performed by your locally-elected County Assessor. Changes in market conditions will result in your property’s base value fluctuating with each reassessment.
The ASSESSMENT RATE determines how much of your property’s market value is actually taxed. Different classes of property are assessed at different rates; for example, Commercial property (an office building) is assessed at 29% of its market value, whereas Residential property (a house) is assessed at a fluctuating rate which is currently 7.2%. The Assessment Rates are set by law and in the state constitution.
The mill levy is the rate of tax that is applied to the assessed value of your property to determine the property tax paid. Tax mills are approved by voters, and the mill levy on your property will include all of the various tax mills which voters in your jurisdiction (city, county, state and any special districts) have approved over the years. One mill is equal to one dollar per $1,000 dollars of assessed property value, therefore the “tax rate” for one mill would be .001 (1/1000). For example, if your property has a taxable value of $100,000, and the mill levy in your community is 1 mill (or a “tax rate” of .001), you’ll pay $100 in property tax.
What the heck does my property tax bill mean!?
(Click on the blue boxes below to understand the highlighted parts of this property tax statement for a resident of Jefferson County.)
1) Actual Value
This property’s “Actual Value” of $254,014 (also referred to as the “Base Property Value) is the most recent market valuation of the property which usually lags the current market value by about two years.
2) Assessed Value
The “Assessed Value” of $18,289 is the amount of the property’s “Actual Value” which is subject to property taxation, and is calculated by multiplying the property’s “Actual Value” of $254,014 by the “Residential Assessment Rate” of 7.2%.
3) Mill Levy (Assessed)
This property’s mill levy of 69.5050 mills represents the total of the 12 different local taxes listed on this statement which have been approved by local voters.
4) Total Property Tax Due
This property owner’s total tax bill of $1,271.16 is calculated by multiplying each $1,000 of their property’s “Assessed Value” of $18,289 by the Total Mill Levy of 69.5050 ($18.289 X 69.5050).
5) Local K-12 School District
The two voter-approved taxes to support the local school district amount to 42.878 mills (4.55 + 38.238) representing 62% of the total local property tax bill for this property owner. Therefore, this property owner pays $784.20 each year to support their local K-12 school district (42.878 x $18.289).
Test Your Property Tax IQ
Question: How much would you pay in taxes if you owned a $300,000 house and your mill levy was 60 mills?
Second, multiply your base market value by the Assessment Rate (7.2% for residences) to determine your Assessed Value = $21,600
Third, multiply your Assessed Value by your mill levy (60 mills/ $1000) = $1,296 in property tax.