Are you considering Oregon for your next real estate investment? There are a few things you must keep in mind first, whether you're a landlord or property manager.
Oregon is known for having a high cost of living. Even though it's not the most expensive state in the U.S., its living costs are above the national average, so that should be something important to consider.
One of the most important factors you must evaluate before buying your property in Oregon is the state's property taxes. Oregon is one of the few states in the U.S. that doesn't ask for a sales tax, which is one reason why many investors want to go there. However, you still have to deal with property tax.
Today, we'll take a look at Oregon's property tax system to see how complicated it is to calculate and pay your bills in time. We can tell you right away that the process isn't as hard as it seems, so read on if you want to know all the details!
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About Property Tax in Oregon
Property taxes in Oregon work similarly to other states in the country. Every year, professionals appraise properties to set a fair market value or property value as a part of a property assessment.
What makes property taxes in Oregon different is the fact that your property taxes won't necessarily be calculated based on market value. Instead, they could apply to your maximum assessed value, depending on the case.
According to SmartAsset, the average property taxes in the state go around 0.82%, which is slightly below the national average of 0.99%.
A benefit of Oregon's property tax system is that you can expect consistent tax rates each year, as there are a few set limitations for yearly increases.
When Do You Pay Property Tax in Oregon?
Property assessments in Oregon are based on the fiscal year from July 1st to June 30th of the following year.
You'll get your property tax statement based on your property assessment and other factors by October 25th every year. You can either make partial payments or pay in full by November 15th. If the due date were to fall on a holiday or weekend, your payment would be due the next business day.
In any case, you should get all of that information on your tax bill.
What Are the Consequences of Late Payments?
According to Oregon's real property foreclosure laws, your property is subject to foreclosure three years after your tax bill becomes delinquent. This means that the county could get the legal title to your property if you don't pay your taxes on time.
You have until May 15th of the current tax year to pay all your owed bills.
Once the government gets your property, it can sell it through a tax sale to collect the money you owe.
Oregon gives people two years after the foreclosure process to "redeem" their property. This means they can pay off all their bills, plus fees, penalties, and interest to get their home back.
How to Pay Your Property Tax Bill in Oregon
Each county will have particular payment methods you can choose from, although most of them share the same ones. You can expect the following:
- Online Payments
- Phone Payments
- Mail Payments
- In-person Payments
In some cases, your monthly mortgage will already include property taxes. Your lender will calculate your tax bill, divide it by 12, and then add the amount to each monthly payment. This is often a convenient choice since you don't have to do anything. However, it only applies to those with a mortgage.
How Much Are Oregon Property Taxes?
Your property tax bill will depend on your county's rate and your assessed value.
Something we should point out is that you could get higher property tax bills than your neighbors. This can happen for many reasons.
The most common reason is home improvements. If you made a significant upgrade to your property, you could trigger a reassessment. After the 2008 financial crisis, people could file petitions for reassessments, so your neighbor could have done it to get a lower bill.
You may still get different tax bills than your neighbors if they have a different type of property or if they applied for an exemption.
What happens in the case of new construction? Most of the time, local assessors give these properties a higher value than what the market does. This means that you may probably get a higher property tax if you invest in a newer home.
Another important factor to remember is that each county has particular rates. Washington County, for example, has an average effective tax rate of 1.08%, whereas Douglas County has an average of 0.79%. Make sure to choose your area wisely.
How Is Property Tax Calculated in Oregon?
Every real estate owner in Oregon has to go through a property assessment process to start calculating their taxes. This process involves identifying any taxable property and then assigning a value.
Most of the time, you can expect to get your property's assessed value by January 1st of each year.
Taxable property includes all privately owned real property, personal property used in a business, and manufactured homes, according to the government of Oregon.
Local governments perform two different calculations to determine how much your tax rates will be every year. In any case, your rates will be the lower of these two amounts:
- Maximum Assessed Value: Your property value is limited to either 100% of the past year's maximum assessed value or the greater of 103% of the past year's assessed value. Here, you would multiply your assessed value by your zip code's tax rate.
- Real Market Value: Your property's real market value (or RMV) is the price it would sell for if you sold it on the assessment date, which is January 1st for Oregon. Local assessors calculate this value by comparing the sales of similar properties to yours. In this case, you would multiply your RMV by the Measure 5 limits ($10 per $1,000 for General Government taxes and $5 per $1,000 for Education taxes). You may have to add a few exclusions that don't count toward Measure 5 limits.
The system for Oregon's property taxes ensures that your burden doesn't increase by over 3% in a year.
To summarize: your maximum assessed value will be limited to 3% in annual growth as long as it's less than the real market value. This is usually the case, and it's great news because it means your property taxes could remain stable even if there's a sudden shift in home prices.
What happens if the market value is below your maximum assessed value? Your MAV would either freeze or increase by less than 3%.
In the end, your property tax is calculated by multiplying the property's assessed value by the combined tax rates of the relevant districts. You would then add any additional assessments.
Can You Lower Your Oregon Property Taxes?
Is there a way to lower your property taxes? It depends.
If you feel like you got the wrong appraisal for your property, you can appeal the decision to the County Board of Tax Appeals. Keep in mind you should submit the appeal by December 31st. This doesn't guarantee you'll get a lower rate, though.
There are also a few factors that influence how much the government can charge you every year. We'll explain them next.
Measure 5 and Measure 50
Measure 5 was voted in 1990, and it sets limits on the amount of tax levied per $1,000 of a property's market value:
- Schools and Education Districts: $5 per $1,000 of the property's real market value
- General Government Districts: $10 per $1,000 of the property's real market value
Measure 50, on the other hand, was approved in May 1997, and it helped stabilize tax rates throughout the state. This made a lot of changes to the property tax system in the state:
- It limited the annual growth rate of any taxable property to 3% of its assessed value.
- It created the "assessed value," meaning that properties wouldn't be taxed at their actual value anymore.
- It set a permanent operating rate limit, meaning that tax rates will remain as they were in 1997 unless voters approve a local option levy.
Oregon has no statewide exemptions, so you would have to check your county to see if there are any you can apply to. You may apply to Oregon's tax deferral program if you're a disabled or senior homeowner.
Understanding Oregon property tax isn't too complicated, although a few factors could affect your rates every year. At this point, you should already know how Oregon property taxes work, so all that's left to do is calculate your rates based on everything we told you, and you should be good to go.
Remember you can also seek advice from a professional if you want more help understanding your tax rates and other details surrounding real estate in Oregon.
If you're looking for more tips on property management accounting, check out our whitepaper on the best tips for simplifying this complex process.