Will Colorado property owners actually see real property tax relief? Property owners are fed up with the run away increases in Colorado property taxes and yet the legislature has done very little. The governor and legislature blinked from the threat at the ballot box of two tax initiatives and have called another session to address property tax bills. What are in the new proposals for property tax relief? What will the proposals really save you?
Why the sudden special session on property taxes again
It seems like we are on a giant hamster wheel with property taxes in Colorado with yet another special session. The reason for this special session is that Polis and the legislature were worried that one or both of the proposed tax measures would pass which would lead to even greater government cuts.
What is in the new proposal on property taxes?
In exchange for dropping Initiatives 50 and 108, here is the framework for the new tax proposal
- In the 2025 tax year for taxes owed in 2026, the residential assessment rate for local government taxes would drop an additional 0.15% to 6.25%. Today the rate is 6.7%, but under Senate Bill 233, which was passed by the legislature this year with bipartisan support, it is scheduled to fall to 6.4% in the 2025 tax year for taxes paid in 2026. Residential assessments for schools would remain separate from those of local governments, and would fall to 7.05% from 7.15%. (Both cuts could be larger if property values grow faster than expected next year.)
- In the 2026 tax year, the residential assessment rate for local governments would rise to 6.8%, but the increase is offset by a tax break that kicks in that year, exempting up to $70,000 of a home’s value from taxation. Under current law, it is scheduled to rise to 6.95%. The school assessment rate would remain at 7.05%.
- Nonresidential assessment rates would drop to 25% in the 2027 tax year. Under Senate Bill 233, only commercial and agricultural property assessment rates fall to that level, while the rates for industrial and some other properties increase to 29%. The oil and gas industry, which pays much higher property taxes, would not benefit from the cuts.
- Local government revenue would be limited to 10.5% growth over two years, instead of 5.5% annually under Senate Bill 233. School districts would be limited to 12% growth over two years, a new cap that doesn’t exist in current law
How much will the new tax bill save the average homeowner?
Based on my back of the napkin calculations property owners would save 200-300/year but remember this is after a 21%+ jump in the last reassessment cycle. So long and short, it isn’t going to save a ton of money but long term should prevent huge jumps like we have seen before. Under the new proposal, the max increase is 12% for schools and 10.5% for local governments.
What happens to the two tax initiatives on the ballot.
The agreement at the legislature says that they will both be pulled from the ballot and agree to no new ballot property tax initiatives for 10 years.
Is the new tax bill better than the two tax initiatives on the ballot?
Based on the chart, the ballot initiatives would substantially reduce government spending in the future which depending on your political bent is either a huge win or a huge loss. Long and short, the ballot initiatives are much more aggressive in their cuts than the new law, this is why Polis and the legislature called yet another emergency session to prevent such large cuts.
Summary
Although there is great fanfare about a huge property tax compromise in Colorado, the reality is that property owners will not see much savings and bills can still increase up to 12% every two years. Although this is better than before, it by no means will make property owners happy as they are still paying 21% more than just a few years ago and the rates of increase are still 300% greater than the federal reserve target for inflation.
Additional Reading/Resources
https://coloradohardmoney.com/category/colorado-initiative-50-property-taxes/
https://coloradosun.com/2024/08/15/colorado-special-session-property-taxes-election-2024/
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Glen Weinberg personally writes these weekly real estate blogs based on his real estate experience as a lender and property owner. He is the owner of 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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