Taxes Are On The Rise, What Can You Do?

Have you received your tax assessment in the mail? I did and so did homeowners on my team. Our biggest question and that of many homeowners…what does this new actual value of my home mean to me? It means property taxes are likely to be impacted.

So lets walk through how to calculate your tax changes in a way that you can share with your clients.

Step 1: Get your Notice of Valuation.

Everyone should have received their Property Notice of Valuation in the mail. There may be slight variations from county to county, but most will look like the example below. For this example, I’m using a property in Jefferson County. PLEASE note that if you or your client are in a different county some of these numbers will differ and I’ll highlight where the differences may be as we progress.

Step 2: Determine if the Actual Value is appropriate.

We can all agree that home values have gone up over the last two years, quite substantially in fact. And as timing goes, this one hurts a lot since re-assessments happen every odd year, looking at the previous two years July 1st through June 30th. And June 30th 2022 was the peak of the market!

Values are based on homes sold, refinanced, or completed in close proximity and in like kind to the subject property, not on a fully executed home appraisal of your home… so your value may have gone up due to guilt by association. For example, if a home hasn’t been renovated since the 90’s but was valued based on a neighboring home that was recently gutted, updated and refinanced, you may want to protest the value.

Protesting the value is best done sooner than later. Each county has a cutoff date to submit the protest. For JeffCo the date to file is June 8th. The date should be noted on the Property Notice of Valuation. Fill out the appeal provided with the notice and submit. An appeal can be submitted via mail, in person or online. As a real estate agent, your insight and experience is invaluable during times like this. Support your client’s submission with education about the process, a validation of the value as of June 30th, 2022, and comps and documentation supporting their dispute.

Step 3: Find County Property Tax Rate and Mill Levy.

Let’s get to calculating the tax amount! There are two numbers needed to figure out how much the actual property taxes increased, the Property Tax Rate and the Mill Levy. The tax rate should be noted on the notice, for JeffCo example it is 6.765%. The Mill Levy might be a little harder to find but it’s listed on every county’s website. Per the Jefferson County website the Mill rate is 100. Note that where you live within the county determines the taxing entities which creates your mill levy. (More information and sources can be found here: https://www.jeffco.us/702/FAQs)

Step 4: CALCULATE!

1. Multiply the Current Actual Value times the Assessment Rate to get the new Assessed Value (i.e. the amount you will be taxed on)

For the example above the new assessed value is $791,101 X .06765 = $53,517.98

2. Then take the Assessed Value and multiply times the Mill Levy divided by 1000. This is the new annual Property Taxes amount.

For this example: $53,517.98 X (100/1000) = $5,351.80 (NEW ANNUAL TAXES)

You can compare the new Tax Amount to your past tax amount. Past tax amounts can be found on past loan statements or searching your County’s Tax Assessor website. For the example property the previous property tax amount was $3,872. Subtract the past property tax amount from the new taxes and divide by 12. This will be the total monthly amount the homeowners tax bill just changed by.

(New Yearly Taxes – Past Taxes)/12 = Monthly payment change

($5,351.80 – $3,477)/12 = $156.23 increase every month

Step 5: Now What?!

For this homeowner, a $156 increase may not be large enough to dispute or it might be considered appropriate given the rise in values. But what if it makes the payment too high to afford? How do you help clients who were already at the top of their budget and can not absorb another several hundred dollars out of pocket each month?

There are several options a current homeowner could explore to offset this increase. One is doing a cash-out refinance or obtaining a home equity line of credit (HELOC) to tap into the equity gained to pay the bill.The downside to this solution with today’s higher rates, is a higher monthly payment. This solution makes the most sense if the homeowner also has consumer debt at high interest rates or wants to do home remodeling.

Someone who is 62 or older may want to consider a reverse mortgage to eliminate the principle and interest portion of their mortgage payment making this tax adjustment more attainable. In addition, If you are over 65 years old and lived in the home for at least 10 years, you can also apply for the state funded property tax exception. Check out this link on the State of Colorado Dept of Treasury website for more information regarding tax exemption and relief.

Another option… and as you know, one of my personal favorites… is to look at ways to rent a part of your home to make more income without having to find another job. See if your area is zoned for auxiliary dwelling units, rent out the garage, househack, or finish out a mother-in-law suite.

While I know none of these ‘solutions’ are actually a cure for higher taxes, they can help. Definitely reach out to your clients. Make sure they know they have options. Help them calculate the value of their home. Or maybe you can help them turn their current home into a rental and purchase something that is more cost efficient. They also might find selling is their best option and you being there is a huge help!