General Assessment Information
Property tax calculation is a straightforward multiplication problem - with one catch. The basic formula is:
Taxable Value X Millage = Tax
The Taxable Value of your property is determined via a formula and is limited by the rate of inflation. This number is reported to you by the assessing staff each February when we send Assessment Change Notices to all property owners.
The Millage is the total number of mills (1 mill = 1/1000 of $1) being levied (collected) by each taxing entity (city, county, school, transit authority, etc) and any additional taxes that may have been approved for such things as libraries, fire/police protection, road improvements and such. Millage rates are calculated in the spring for the summer collection and in the fall for winter taxes. Millage can and does vary a little from year to year due to a number of factors, however, any major change in millage will be the result of a public vote, or the expiration of a previously voted millage.
So, what's the catch? As we mentioned, a mill is equal to 1/1000 of a dollar. Therefore, you must divide something (either the taxable value, the millage, or the answer) by 1000. Here are some examples:
Taxable Value = 75,000, Millage = 25.0000
|75,000||X||25.0000||=||1,875,000 / 1000 = $1,875.00|
How Taxable Value is Calculated
Taxable value, the number upon which your tax bill is figured, is determined each year by comparing assessed and capped values and choosing the lower of the two. Assessed value is determined by the assessor, and is based upon market value. Capped value is determined via a formula:
(Prior Year Taxable Value - Losses) X (lesser of inflation rate or 5.0%) + Additions = Capped Value
Losses equal the taxable value of any physical removal/destruction to the property. Additions equal (in most cases) the assessed value of any physical improvements to the property.
Once capped value has been determined, a simple comparison is made to determine taxable value:
Taxable Value = (lesser of Assessed Value or Capped Value)
There are two forms of the Principal Residence Exemption Affidavit, one used for claiming and one used for rescinding the Principal Residence Exemption for residential properties which are owner-occupied. The Principal Residence Exemption is a product of the property tax reforms put in place by the legislature in 1994, generally known as "Proposal A". The Principal Residence Exemption basically excuses the residential owner-occupied property from 18 mills of the total millage levied as property tax. The purpose is to relieve taxpayers of a portion of the burden of funding public schools, on their primary residence. Second homes, cottages, and rental properties are not eligible, and must pay the full millage, as all commercial and industrial properties must do.
When you purchase a home (either brand new, or an existing home) you must claim the exemption in order to receive it. When you sell your home, or change its use from being your primary residence to something else (second home, rental property, etc) you must rescind the exemption.
The most commonly used form is the Principal Residence Exemption Affidavit (Form 2368, formerly T-1056), which can be used to claim the exemption. This form is best suited for situations where there is no current exemption in place for the property, such as a newly built home, a home previously used as rental property, when the previous owner has rescinded the Principal Residence Exemption, as when the property transfers or sells.
Also in use is the Request to Rescind Principal Residence Exemption (Form 2602, formerly T-1067). This form is best suited for those situations where the use of the property has changed (to a rental or second home).
The Property Transfer Affidavit (Form 2766, formerly L-4260) is used to report the transfer (sale, inheritance, etc) of property to the local assessor. This form is also a result of the "Proposal A" reforms. Proposal A "caps", or limits the rate of increase of your properties "taxable value" (the value used to calculate your tax bill). The taxable value cannot rise faster than the rate of inflation (excepting value added through additions or improvements) until such time as the property is transferred. In the tax year following the transfer of the property, the taxable value will "uncap" and become equal to the "assessed value" (assessed value is one-half of the assessors estimate of the market value of your property). In order to ensure that this "uncapping" adjustment is made on all transferred property, the law now requires the transferee (buyer, inheritor, etc) to file this form within 45 days of the transfer.
In order to assure compliance with this requirement, the legislature attached a penalty for failure to file. Starting on the 46th day after the transfer, there is a $5/day penalty ($200 maximum) which begins to accrue.
Are These Forms Important to Me?
What you do, or fail to do, with any of these forms, can have a significant effect on you financially. If you fail to file a Principal Residence Exemption Affidavit when your property is eligible, you will pay too much tax. If you fail to rescind the exemption when the property no longer qualifies, you could be billed by the State, County, or Local Treasurer for additional taxes, penalty and interest. Failure to file a Property Transfer Affidavit can have far more serious consequences than the $5/day penalty - if several years have elapsed when the transfer is discovered, you could be billed for all additional tax which should have been levied each year since the time the uncapping would normally have occurred, including penalty and interest.
Where Are These Forms Available?
These forms are generally made available to buyers and sellers by title companies, usually at the closing. The title company usually handles mailing in the form, as well. However, it is in your best interest to be certain that these forms are received by the assessor!
All of the above mentioned forms are available at your local assessors office. You can also print the forms directly from our website. To go to the Resource Center section of our site and obtain these forms, click here.