Welcome to tax time in Colorado. Property tax bills are being mailed out and you are sure to be in for a shock. I just looked at my bill and my tax bill went up 20% from last year! I’ve seen throughout the front range and various mountain communities tax bills increase between 20-30% and this is just the beginning. What can you do about the huge jump in your tax bill? Why did they go up so much this year when it isn’t a reassessment year?
I have assembled a free guide to explain how Colorado property taxes work, the appeal process, and why the huge jumps are occurring now and to answer the following questions:
- When/how is your assessed value determined and in turn your property taxes?
- Why did Colorado property taxes jump so high this year?
- What can you do about a huge increase in your Colorado property taxes?
- Are further big jumps in property taxes on the way?
How are property tax values determined and when are they determined?
Note, your assessment is not what your house is worth today. In Colorado every county is the same, each odd numbered year is a revaluation year ( 2021 is a revaluation year). During the revaluation period the tax assessor looks at comparables 18 months prior, so for 2021 they would be using 19 and 20 comparables (to be exact you can use a comparable up to 6/20). Property owners see the impact of the 2021 revaluation cycle in your tax bills now as taxes are paid in arrears.
Why are we seeing such a big jump in taxes this year?
Most areas in Colorado continued picking up steam (aka value) as the pandemic unfolded. In many areas values increased > 15% a year during these two years with some mountain communities almost doubling during the last two years. These increases were reflected in the sales that ultimately are used in the 2021 revaluation cycle and in turn you are now seeing on your recent property tax bill
Is assessed value the same as market value?
Remember, property tax value is not market value. Property tax value is derived from prior sales (last summer and earlier). The market was in a much different place then than it is now. The statute in Colorado does not care about current market value. The increase you are seeing this year was for “prior” real estate appreciation that is now just flowing through to your property value which ultimately determines your property taxes
Are further increases on the way?
Yes, the full impact of the Covid buying spree has not been factored in. From June of 2020 to now we have already seen huge appreciation, upwards of 25% in most of Colorado. We will have one more big jump in assessed values as the recent high price sales that occurred between last summer and now are not factored into last years assessed values. For a quick guess on how much your taxes will increase in the next cycle, take your recent tax bill and multiply it by the appreciation in your area. For example, if you look at the average in Colorado, this equates to around 25%. If your tax bill this year is $5,000, then your future tax bill will be north of 6250. Note, counties are fast to raise property values, but very slow to drop assessed value unless you appeal, and I do not see a huge market correction in the offing to get taxes lower.
Why are Colorado property taxes increasing so much now? In the past we didn’t see such huge jumps.
A few years ago, there was a huge effort to repeal the Gallagher amendment which basically balanced residential and commercial property valuations (like a scale). As Commercial appreciated considerably slower than residential properties, this minimized huge jumps in property taxes (the mill levy would adjust to keep them in balance) With the elimination of Gallagher, property taxes now increase (or decrease) every odd year based on the actual value of the property while the mill levies stay constant (or increase based on voter approved items).
Can you protest your taxes?
Unfortunately, you had to appeal your taxes last year. You will get another chance to appeal your value in 2023. Remember, Colorado revalues properties every odd year and the appeals are in the reassessment years. On a similar note, even once the appeals process opens next summer it will be difficult as prices have gone up everywhere fairly uniformly in most neighborhoods so finding lower sales will not be easy.
Summary
Long and short, Colorado is a bit unique in that the values we see now are from last summer and prior so the recent jumps in values have not been fully factored into tax bills yet. Unfortunately, you have missed your chance to appeal for this cycle, but you will have another chance next summer. In the meantime, brace yourself for the envelope with your new tax bill. Furthermore, once you get over this year’s sticker shock, you will have an even larger one next year. The irony is that our legislature is wondering why Colorado is so expensive; maybe they haven’t looked at their tax bill.
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Written by Glen Weinberg, Owner Fairview Commercial Lending. Glen has been published as an expert in hard money lending, real estate valuation, financing, and various other real estate topics in Bloomberg, Businessweek ,the Colorado Real Estate Journal, National Association of Realtors Magazine, The Real Deal real estate news, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.
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