Brad Bonkowski: Understanding Carson City’s property taxes
For the Nevada Appeal
Carson City property taxes
Using an example home with a taxable value of $100,000 and starting with the 2004 tax year the following shows the relationship between the property value and tax bill through the 2008 tax year:
Year: 2004 2005 2006 2007 2008
Market Value: $100,000 $150,000 $250,000 $200,000 $150,000
Assessed Value (35%): $ 35,000 $ 52,500 $ 87,500 $ 70,000 $52,500
Taxes Owed (Assessed Value times a sample Tax Rate of $3.20 per $100 of assessed value):
$ 1,120 $ 1,680 $ 2,800 $ 2,240 $1,680
Taxes billed (Due to the 3% cap): $ 1,120 $ 1,153.60 $ 1,188.21 $ 1,223.85 $1,260.56
Amount of tax in abatement account: $0 $526.40 $2,138.19 $3,154.34 $3,573.78
Editor’s note: The Nevada Appeal presented the Carson City Board of Supervisors, the mayor and city manager an opportunity for a column. Mayor Robert Crowell will appear next Sunday:
Many Carson City residents have contacted me over the past two years to ask why their taxes continue to climb, even as property values plummeted during the recession. With the Assessor’s help I have the following answer:
Property is taxed based on the “assessed value”. To determine that number, the Carson City assessor evaluates property values annually. The land is appraised at market value and any improvements, like a house or commercial building, at replacement cost as new minus 1.5 percent a year depreciation for up to 50 years. The total is then reduced by 65 percent to get the assessed value.
This formula comes from the state and Nevada is the only state in the country that uses this method.
The only input the City has in your property tax is in setting the property tax rate. By law, counties can assess taxes up to a maximum rate of $3.66 per $100 of assessed value; Carson City’s proposed rate for 2015/16 is $3.52.
The state has also set caps on annual billable tax increases at 3 percent maximum annually for a primary residence, and 8 percent maximum for commercial and investments properties. Because of the cap, each property owner has an abatement account. It accumulates the amount of taxes that aren’t billed and collected because of the caps. If an increase in a property’s taxes exceeds the cap, the difference goes into the abatement account. If your property’s value drops, your tax bill may not if there is a balance in the account.
In the box that accompanies this column is an example on how the property tax is calculated and billed: Pay close attention to the abatement account.
You can see the value of the home starts at $100,000 in 2004, increases to $150,000 in 2005, rises to the high value of $250,000 in 2006 and drops back to $150,000 by 2008. However the taxes you pay are different than the amount of taxes actually owed each year, because of the tax cap. The actual tax due on the property in 2006 was $2,800 but because of the 3 percent cap the billed tax was lowered to $1,188.21. The difference between what the true tax bill would be without the cap and what was billed after the cap is applied goes into your tax abatement account, where it continues to increase even as the value of the home goes down. This is the answer to why your taxes can go up even when the value of your home decreases. This comes from the misconception the amount you see on your tax bill is the total amount of property tax owed. It’s actually the amount of the taxes owed you can be asked to pay, because of the tax cap.
The rest of the taxes are still owed, but are transferred to your abatement account while the amount you can be billed continues to increase by the amount allowed under the tax cap, regardless of what is happening to the market value of your property. The tax amount in your abatement account is not required to be paid at some point in the future, but can be drawn down per the above example.
Ultimately, our tax system is not considered the worst in the nation, but there are major flaws. For example the 3 percent tax cap on a primary residence vs. 8 percent on investment property means two identical houses sitting side by side may have different tax bills; and the tax assessment method, as you can see, is overly complicated. Few people, other than the Assessor, actually understand it. For more in-depth information about Nevada’s property tax system you can read Nevada Taxpayer Association’s publication (where the tax assessment example above was borrowed) at: http://www.nevadataxpayers.org/pdf/property-tax-2011-12.pdf or contact the Carson City Assessor, Dave Dawley, at firstname.lastname@example.org or me at email@example.com.
Ward 2 Supervisor Brad Bonkowski can be reached at firstname.lastname@example.org or 283-7073.