Colorado, with its vast river canyons and mountains, is the state of choice for many property owners. However, with owning real estate comes the obligation of property taxes. As a homeowner or property manager, understanding the ins and outs of property taxes is essential.
If you're wondering how your taxes are calculated, whether there is any way to lower the amount, and how many times you are required to pay per year, then you have come to the right place.
In this comprehensive guide, we'll take a more in-depth look at property taxes to ensure that you have all the information you need to navigate this important subject.
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Understanding How Property Taxes Work in Colorado
Residential property taxes in Colorado are determined by the assessed value of the property and the overall tax rates imposed by local taxing agencies. School districts, counties, and cities are some examples of taxing authorities. Taxes could be used to support a water or sanitation infrastructure, for example.
Real estate is evaluated in two-year cycles and is solely based on equivalent sales. In other words, the value of your home is determined by the prices of comparable homes sold in your neighborhood.
Every year, valuation notices are issued to homeowners by May 1, and anyone who would like to dispute the value of their real property has until June 8 to do so. For those with personal property, the deadline is June 30.
How Many Times Do You Pay Property Tax a Year in Colorado?
Another important aspect to understand is the frequency of payments. Planning ahead is important if you want to meet the deadlines. Property taxes can be paid twice a year in Colorado in two installments:
- First Installment: Your first property tax installment will be due by the end of February. If February 28th falls on a weekend or holiday, the deadline may be pushed back until the following working day.
- Second Installment: On June 15th, the second installment is due. The deadline may be extended to the following working day if June 15 falls on a weekend or holiday.
Keep in mind that you could choose to pay your annual tax all at once by April 30.
Moreover, the due dates for installments could vary from one county to another, so it's always best to confirm the details with your local county treasurer's office.
The Consequences of Late Payments
Failing to pay your personal property tax bills will result in the property tax amount being added as a lien on your home. If there is a lien on your home, it is important to remember that the tax collector might choose to auction that lien, which is called a tax lien sale.
This means that refusing to pay your taxes could result in your home being sold to the highest bidder, which is why it is important that you stay up to date on your taxes and make timely payments.
How to Pay Property Taxes in Colorado
The truth is that there are many ways to pay your property taxes in Colorado. You can choose to pay online or in person.
However, the details will vary from one county to another, so be sure to check the payment options in your county or city for more details on how to make payments.
How Much Is Property Tax in Colorado?
Understanding the amount you will be liable for is important. However, you must remember that the value will vary based on a number of factors.
To determine what the actual residential value is, be sure to visit your local assessor's office.
In the meantime, here are some of the factors that play a role in determining the taxable amount for your property in Colorado.
Market Value of the Property
The assessed value of your home is the most important element in determining the property taxes you will pay.
This value is determined by county assessors and should reflect the current market value of your property.
Residential Assessment Rate
Residential and non-residential properties in Colorado are assessed at separate rates.
The residential assessment rate is 6.77%. These rates are applied to the assessed value of the home to determine the property's taxable value.
The Mill Levy
The mill levy is a key component in determining property tax amounts. Every taxing authority will have its own mill levy rate. A mill is equivalent to one-thousandth of a dollar.
The total property tax amount you owe for your property is calculated by multiplying its market value by the sum of all applicable mill levies.
Local Tax Policies
Property tax rates and revenues can be influenced by local tax policies, such as voter-approved initiatives and local government decisions. This can involve certain tax exemptions, bond issues, and changes to specific municipal tax policies.
Any improvements you make to your property will ultimately affect its market value. Improvements could include renovations or the building of additional structures, such as garages, that boost its value.
How Is Property Tax Calculated?
Property taxes are calculated by multiplying the value of the home by a statewide residential assessment rate and local tax rates (or mill levies).
In Colorado, property tax rates do not relate to the market value of a home but to the assessed value instead, which is only a small percentage of market value.
The state recalculates that fraction, which is known as the residential assessment rate, on a regular basis, and the current rate has been estimated to be 7.15%.
Look up your address on the county assessor's site to learn more about your local mill levy rate. It's important to remember that certain exemptions may apply, so it's best to visit your local county assessor's office if you'd like a more accurate picture of how much you are expected to pay.
How to Lower Taxes for a Residential Property in Colorado
We recommend looking into potential tax reductions, as property tax has a direct impact on your earnings as a landlord or property investor. Let's explore some of the ways you can reduce your property tax amount in Colorado.
Appeal the Assessed or Taxable Value
If you notice that the assessed value of your property is higher than the actual value, you can try appealing it to lower the overall tax you are liable for. To appeal this value, you will need to file an appeal at the assessor's office in your city.
Enquire About Disaster Property Tax Relief
When there is a state of disaster, the state (or local counties) may decide to offer property tax relief or a reduced tax rate. Enquire about such reductions to save on Colorado property taxes.
Look Into Exemptions
There are a number of property tax exemptions that may apply for commercial or residential properties. The first $30,000 of actual improved commercial value, for example, is exempt from taxation for commercial properties in 2023 only. Here is a list of some of the exemptions that apply in Colorado:
- Property tax deferral
- Senior citizen property tax exemption
- Property tax/rent/heat rebate
- Exemptions for senior citizens
- Disabled veteran property tax exemption
- Property tax work-off program
Important Propositions for Real Estate Investors
A number of propositions enacted by voters in Colorado have substantial ramifications for property owners, altering how taxes on real estate are assessed.
Knowing these principles as a property manager, investor, or landlord will help you make informed decisions and improve your tax approach. Proposition HH has property managers, owners, and investors in a buzz. We'll talk a little more about it in the section below to help you understand what it's about.
Here are some crucial points that every property owner should be aware of.
Proposition HH is a proposition that will be included in ballots in November 2023. While Proposition HH could reduce property tax rates, it would also diminish the extent of future refunds to taxpayers in Colorado, which limits annual government expansion according to population growth and inflation.
This proposition would raise the cap by a further 1% and direct the additional property tax revenue to local government entities and schools to compensate for a portion of the funds that they could have gotten from property taxes if the legislation had not been passed.
Colorado is listed in the top 10 best states to own rental properties in the United States. While owning property can be a lucrative investment opportunity, understanding the tax implications is important, as it has a direct impact on your bottom line.
Having a comprehensive understanding of tax laws, when you are expected to make payments, the consequences of non-payment, and propositions that may change the tax rates you pay is crucial to your success.
Make sure you remain up to date on important changes and consult your local assessor's office if anything is unclear. By staying on top of things, you can prevent nasty surprises and ensure that you have explored every avenue for saving on your annual taxes.
If you're looking for more tips on property management accounting, check out our whitepaper on the best tips for simplifying this complex process.