Although HH, the Colorado tax reduction initiative was ultimately defeated, there was one profound item…
Get ready for sticker shock; as you will be receiving your new tax assessment in the next few weeks (typically the beginning of May) and time is of the essence as you have a limited window if you want to fight your tax value. How can assessed values continue to increase even though property values are softening? How are property tax values determined in Colorado? What steps must you take to appeal your Colorado property taxes? Note, do not count on the legislature to bail you out of the huge increases!
I’ve appealed my property taxes in various counties throughout Colorado and the process is the same in each county. Can you appeal and win? Absolutely, but you must follow the rules to a T.
How much are your Colorado Property taxes going up?
I did a quick analysis on Denver County. Values have gone up 51% for the average home since the last assessment (6/20-6/22). This will be reflected in the new assessed values sent out next summer and in turn property taxes will increase substantially. It is counterintuitive that property taxes are increasing when values are falling or at best flat in most markets, but assessments in Colorado are in “arrears” meaning they are backwards looking and only occur in odd years. Below are more details on how taxes work in Colorado and what you can do about it in regards to an appeal.
I have assembled a free guide on Colorado property taxes and the appeal process
- When are the values determined?
- Why is this year such a big jump?
- What can you do about it?
- Are further increases on the way?
- 5 tips to appeal and win
How are Colorado property tax values determined and when are they determined?
In Colorado every county is the same, each odd numbered year is a revaluation year ( 2023 is a revaluation year). During the revaluation period the tax assessor looks at comparables 18 months prior, so for 2023 they would be using 21 and 22comparables (to be exact you can use a comparable up to 6/22)
Why is 2023 a big jump in Colorado Property tax values?
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 2023 revaluation cycle
Is assessed value 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 Colorado property tax increases on the way?
Increases will be determined based on increases in value. Depending on the real estate market, 2025 could provide some relief. Note, counties are fast to raise property values, but very slow to drop them unless you appeal. Note the legislature has proposed a number of possible reductions, but none of them look that promising in addressing the underlying issue that property taxes have no cap now that the Gallagher amendment has been repealed.
Should you protest your Colorado Property taxes
Yes, if there is any chance you think your property is overvalued based on recent sales in the time period of 6/20 to 6/22. There is very little downside risk on an appeal other than a few hours of time. The worst I’ve seen assessors say is no and the value remains the same. The process is relatively easy. Below is a 5 step guide for appealing. Ensure you follow this to a T in order to have your appeal considered and increase your probability of winning.
6 tips to appeal your Colorado Property taxes and win
Although 2031 will be difficult to win a large appeal since values have almost universally gone up throughout the state, you should be able to get at lease minor relief if your property is overvalued. I’ve appealed my property taxes in 3 counties throughout Colorado and won on each one. Below are 6 tips to help you navigate the appeal and increase your odds of winning.
Before starting, it is important to note that the assessor doesn’t care what you “feel” your property tax value should be, what your zestimate says, or what your recent appraisal was for. The property tax value is based on facts during a stated time period. The only way to have a chance at winning an appeal is to follow the directions to a T and leave your feelings behind.
- Dates are important, by statute you have from 5/1 to 6/1 in the reassessment year to appeal. If you miss these dates you are out of luck. Most counties allow you to appeal online and the process is easy (just google your county + assessor). They typically have a simple online form where you can put in your information and the appeal information
- Follow the rules: remember for this year the only comparables that can be used are prior to 6/30/22 (typically a two year period), statute says that you cannot go back more than 5 years unless there are extenuating circumstances
- Check your facts: This is low hanging fruit. Ensure the assessor has your info correct, is the property and office building yet classified as mixed use? Is the square footage correct? Is other information accurate. Correcting this info could substantially reduce your tax burden
- On residential, it is a numbers game: How residential appraisals work is the county calculates a neighborhood average and finds sales in close proximity to your house with similar characteristics. The averages can lie. For example in my neighborhood when I appealed in 17, there were a number of lower sales (also some higher one), I was able to make the case that I felt my house was closer to the lower sales (remember you are not talking about market value, nor does this influence the sale price of your home, etc…). I was successful in my appeal and got my property value reduced over 30%
- On Commercial, use both methods: On a commercial property both the sales and income approach are used. If you had a tenant during this time period, the income approach (take net operating income divided by the applicable capitalization rate—the income approach on a commercial property is a separate article I’ll post at a later date) is a very good method to start with. The sales approach is the second method that can be utilized. Commercial is a bit more in depth than the residential appeal since commercial properties are considerably less uniform than residential properties.
- Use various tools to get your facts straight: To win an appeal, the appeal must be fact based. Saying you “feel your property is overvalued” is a waste of time. Make sure you have your facts straight (at a minimum 3 applicable sales for residential; for commercial address both the income and sales approach). You can get both sales comparables from the county websites for a specific neighborhood (do not use Zillow or Trulia, the square footages can be inaccurate, make sure you use the county data to ensure you compare above grade square footage and you will also have to input the parcel id numbers for each of your comparables). For a commercial property use a tool like loopnet.com or Costar to see what asking rents are , get sales comps, etc… loopnet has many pictures and details on various commercial properties.
Long and short, Colorado is a bit unique in that even though real estate prices are falling/softening there will still be huge jumps in taxes as the prior increases have not fully factored in. Fortunately, you do have the ability to protest but it will be difficult to get much reprieve as basically every real estate value went up during the revaluation period. If you do appeal, make sure you follow the steps above to the T to increase your odds of winning.
Also note, do not take your frustration of higher taxes out on the assessor as they are just following the law, if you don’t like the higher taxes, the legislature, governor, and ballot box is where you should focus your efforts. Remember one of the key reasons for the huge jump in taxes is the elimination of the Gallagher amendment that balanced commercial with residential assessments which led to huge jumps in residential property taxes.
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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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