A Colorado county assessor reassesses all properties in the county every two years as part of a general reassessment cycle. A homeowner receives her new Notice of Valuation and discovers her property's actual value has increased by 20%. She is concerned her property taxes will also increase by 20%. Her broker explains that a 20% increase in actual value does not necessarily mean a 20% increase in property taxes. Which of the following best explains why?
Correct Answer
C) The property tax owed depends on both the assessed value and the mill levy; if the mill levy decreases, the tax increase may be less than the valuation increase
Property tax is the product of assessed value and the mill levy. Even if assessed value increases by 20%, the actual tax change depends on whether the mill levy also changes. Under Colorado's TABOR (Taxpayer's Bill of Rights, Article X, Section 20), local governments often must reduce mill levies (or seek voter approval) when assessed values rise, to avoid collecting more revenue than permitted. Therefore, a 20% increase in actual value does not automatically translate to a 20% increase in property taxes because the mill levy may be adjusted downward.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Homestead portability allows homeowners to transfer a portion of their accumulated homestead tax savings to a new homestead in the same state.
The income approach estimates a property's value based on the income it generates by converting net operating income into a value estimate using a capitalization rate. It is the preferred method for income-producing properties.
Many states have laws to limit how much property taxes can increase each year, regardless of market value fluctuations.
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- → The income approach to appraisal is most commonly used for which type of property?
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- → External obsolescence in Oklahoma:
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- → Three depreciation:
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Previous Question
A residential property in Colorado has an actual value of $600,000. The residential assessment rate is 6.95% and the total mill levy is 100 mills. The closing date is April 1. Colorado property taxes are paid in arrears. What is the seller's tax proration credit owed to the buyer at closing? (Use a 365-day year; the seller is responsible for January 1 through March 31 = 90 days.)
Next Question
A Colorado property owner fails to pay her property taxes for three consecutive years. The county treasurer initiates the tax lien sale process. Which of the following most accurately describes what happens to the property owner's rights after a tax lien is sold at a Colorado tax lien sale?