It’s the time of year many of our clients inquire about property taxes and how they are figured. While this seems like a complicated formula, it’s fairly simple once you understand a few of the basics. In the state of Colorado, we have what is called the Gallagher Amendment, which basically divides the state’s total property taxes between residential and commercial properties. It states that 45% of the property taxes must be collected by residential properties and 55% must be collected from the commercial/land properties. It also states the commercial and land assessed rate must be fixed at 29%. The residential rate adjusts to keep the 45/55 split (https://www.cde.state.co.us/sites/default/files/documents/cdelib/librarydevelopment/publiclibraries/librarydistrictinformation/download/pdf/gallagheramendmentquestions.pdf).
Before that information seems overwhelming, here are the basics that apply La Plata County. The property tax formula is generated by: the appraised (market) value of the home multiplied by the assessment ratio multiplied by the mill levy. In Colorado, the assessment ratio for all other properties but residential and oil and gas is 29%, and the assessment ratio for residential property is currently 7.2% (down from 7.96 most recently). The appraised value is generated by the La Plata County Assessor’s Office Appraisal staff. “Mill levies are the rates of taxation set by each taxing district*. Your total mill levy, therefore, depends on which taxing districts you live in. The County, cities and towns, school districts and special districts each have a separate mill levy, which is noted on the annual tax bill you receive from the County Treasurer” (http://co.laplata.co.us/cms/one.aspx?portalId=1323753&pageId=12342396).
Here is an example: For a residential property with an appraised value of $500,000:
$500,000 (appraised value)
Multiplied by 7.2% (assessment ratio) = $36,000 (assessed value)
$36,000 multiplied by the Mill Levy (approx. In town Durango’s Mill Levy is .036) =$1,296.00
The same appraised value on a commercial or land property: $500,000:
$500,000 (appraised value)
Multiplied by 29% (commercial assessment ratio) = $145,000 (assessed value)
$145,000 multiplied by the Mill Levy (approx. In town Durango Mill Levy is .036) = $5,220.00
As you can see by the example above, the property taxes for residential and commercial properties are different, based on the formulas used and the different assessment ratios for commercial and residential properties. Also, important to note: Mill levies vary based on your taxing district laws. Depending on where you live, your mill levy could be higher or lower than the example we used. They can range from 36 mills to 106.84 mills, depending on where in the county you live. This is an important consideration we discuss with our clients, as it will impact property taxes.
This is just a brief overview on how property taxes work in the state of Colorado. The attached YouTube Video does an excellent job explaining the nuances and how the laws work together to generate some of the numbers. As always, we are available to discuss and explain if you have any questions. https://youtu.be/_-CVZn5eD8E