This column was published in the Denver edition of YourHub from the perspective of Denver property owners. A version of the same article from the perspective of Jefferson County property owners can be found at www.JimSmithColumns.com.
By the time this column appears in print, all Denver homeowners will have received in the mail a letter from the Denver Assessor declaring the “Actual Value” of their real estate holdings in the City & County of Denver. The same is happening in all Colorado counties. The letters give taxpayers until June 1st to file an appeal of that valuation which, if successful, could lower the “Assessed Value” (explained below) against which taxes will be levied for 2017 and 2018.
Property taxes in Colorado are paid in arrears, which means that the property tax for 2017 isn’t payable until April 2018, and the property taxes for 2018 will be payable in 2019. The valuation you just received in the mail, however, is not a statement of your home’s current value. Rather, it is a statement of your home’s market (or “Actual”) value as of June 30, 2016, based on its condition on January 1, 2017.
In other words, if your house was significantly improved between June 30, 2016 and January 1, 2017, the assigned value should be what your home in its new condition would have been able to sell for on June 30, 2016, based on what comparable homes did sell for prior to that date. (You may need to read these two paragraphs a few times!)
The good news is that even though your home’s value has continued to increase since last June and will continue to rise for the next year or two, you will only pay property taxes for the next two years based on what it might have sold for in June of last year.
Nevertheless, many of us (me included) are going to be shocked at how much the assessor claims our homes have increased in value.
Additional good news for homeowners is that, because of both TABOR and the Gallagher Amendment — too complicated for me to explain here — the percentage of “Actual Value” against which your local mill levy will be applied, has reduced by almost 10% — from 7.96% of actual value to 7.2%. That creates the “Assessed Value.”
To keep it simple, here’s an example using round numbers. If the assessor says the market value of your home for the last two years has been $500,000, your “Assessed Value” was 7.96% of that, which equaled $39,800. If your mill levy is 100, then your tax bill was $3,980 (100 x 39.8). Let’s say your home’s “Actual Value” as of last June 30 rose to $600,000, a 20% increase. Your “Assessed Value” will be 7.2% of that, or only $43,200. Thus, your tax bill, at 100 mills, will be $4,320, an 8.5% increase in taxes despite a 20% increase in market value. By the way, this is the first reduction in the assessment percentage since 2003. Great timing!
And it gets even better. Unless the voters in a particular tax district voted to “de-Bruce” the mill levy, that tax district must lower its mill levy as much as necessary to keep its revenue from increasing beyond TABOR limits based on population growth plus any increase in the cost of living.
Nevertheless, since your property taxes are the sum of multiple mill levies from various districts, that hypothetical rate of 100 mills that I used above might actually be lower this year, further reducing your property tax bill.
Here are two key points you must keep in mind when appealing the valuation assigned to your home by the Denver (or other county) assessor:
1) You can only appeal the assessor’s valuation by citing comparable sales during the 24 months prior to June 30, 2016. Unless your home was mischaracterized (wrong neighborhood, style, etc.), all eligible comps are listed under “Neighborhood Sales” on the assessor’s web page for your home, so don’t bother looking elsewhere.
2) You must “age” every comp you cite in your appeal by about 1% per month, since the median increase in Denver residential property values was 25.9% over that 24-month period. Thus, if a comp sold in early Jauary 2016 for $500,000, you can’t cite it as a comp at the price, but must increase that price by 6% to its theoretical value as of June 30, 2016.
To find your home on the assessor’s website, visit www.denvergov.org/property and enter your address. When your property is displayed, then click on the address and you’ll be able to click on a “Comparables” tab where you’ll be able to see exactly how the value of your home (the “Subject” property) was determined against 3 or more comparable sales identified by address.
If you feel that those comps are not truly comparable to your home, you can click on the “Neighborhood Sales” tab and choose three or more other comparable sales and cite those in your appeal. You have to file your appeal (most effective, I’ve found, is in person) by June 1st.