Unraveling the Nuances of 2023 Colorado Property Tax Appeals and Reductions

The vibrant landscape and robust economic growth make Colorado an attractive destination for homeowners. However, more residents looking for more homes pushes housing prices in Colorado higher, especially in real estate bull markets. In 2023, Colorado property tax valuations soared thanks to poor timing, and those higher real estate prices.

How Colorado Property Taxes Work

Understanding the Colorado property tax landscape sets the foundation for a successful appeal process. Property taxes in the Centennial State are calculated based on the property’s assessed value, multiplied by the local mill levy. The assessment rate for residential property in Colorado is currently set at 7.15%. The mill levy, however, varies considerably depending upon the specific county, city, or district where the property is located. This two-pronged approach necessitates meticulous evaluation of both elements to achieve a significant reduction in tax liability.

While most Colorado residents understand and plan for their property taxes, the 2023 property tax valuations were a staggering jump in taxes that residents from Denver and beyond were not prepared for. A solid grasp of how properties are valued, who conducts the evaluations, and how frequently these assessments take place, is essential for homeowners to plan their financial obligations effectively.

Property Tax Valuation in Colorado

At the heart of Colorado property tax calculations lies the process of property valuation. This process aims to determine the market value of the property, which forms the basis for the homeowner’s tax bill. Although the valuation process is no longer governed by the Gallagher Amendment it still has two components – market value and the assessment rate.

Market value represents the amount the property might sell for under current market conditions. This valuation is based on an analysis of the sale prices of comparable properties in the same or similar neighborhoods. It takes into consideration factors such as location, age, size, condition of the property, and recent real estate trends. The law calls this value the actual value of your home.

Once the market value is determined, it is multiplied by the assessment rate to calculate the assessed value. As of 2023, the assessment rate for residential properties in Colorado is set at 6.95%. Therefore, if a home’s market value is $500,000, its assessed value would be $32,250. This assessed value is then multiplied by the local mill levy, converting the assessment into a tax dollar amount.

Who Determines Property Values in Colorado for Property Taxes?

The responsibility of evaluating properties and determining their market value rests on the shoulders of the County Assessor’s Office. The assessors are state-certified professionals who have the task of ensuring that property values are set fairly and accurately, in compliance with Colorado law.

It is important to note that property evaluations are not performed annually. In Colorado, a reappraisal cycle takes place every odd-numbered year. This means that properties are reevaluated and their market values adjusted every two years, which is why Colorado homeowners may observe shifts in their property tax obligations over time.

During these reappraisal years, homeowners receive a Notice of Valuation from their County Assessor’s Office by May 1st. This notice provides an update on the market and assessed value of their property, which will be used to calculate their property tax for the next two years. This biennial system is designed to reflect changes in the property market, ensuring that tax liabilities align with current property values. The reason why Colorado homeowners are freaking out about huge leaps in their property tax valuations is that the dates used for computing reals estate values coincide with the rapid run-up of real estate prices in 2021.

colorado property taxes
They want your tax dollars, not me…

How To Appeal Colorado Property Taxes Valuations

Now, here is the bummer. You can’t just say your property taxes are too high in an appeal. Your property taxes are your own responsibility (and your neighbors) based upon what you did and did not allow through the years by voting for various parts of your local mill levy that determines your taxes. The only part of your property taxes you can appeal is the valuation. That is, you can only argue that your house was worth less in 2021 than the assessor says it was.

Let’s navigate the daunting path of property tax appeals first. Challenging the assessed value of a property forms the cornerstone of the tax appeal process. The evaluation of the property’s worth is performed by the County Assessor’s Office, who may occasionally overestimate a property’s value, leading to higher tax bills. To contest this, homeowners need to provide compelling evidence that their property’s assessed value is inaccurate.

The 2023 Colorado appeal process begins by carefully reviewing the Notice of Valuation received from the assessor’s office. An appeal can be filed online, by mail, or in person, within the stipulated period of May 1st to June 1st. Homeowners need to submit relevant supporting documents, such as independent appraisals, sales data of comparable properties, and pictures demonstrating property condition. A well-prepared and research-backed appeal can significantly improve the chances of lowering one’s property tax burden.

Unfortunately, it isn’t like the county assessor just guesses at your property value. They use the same real estate databases, sales information, and comparables that your relator, or lender uses to determine the value of your house. In other words, if the bank gave you a home equity line of credit based on your house being worth $500,000 in 2021, chances are the assessor will value it at the same $500,000, making an appeal difficult.

Lowering Colorado Property Taxes

While the appeal process offers one pathway to reducing property taxes, it’s equally important to explore tax deductions that Colorado homeowners might be eligible for. One such tool at their disposal is the residential property tax deduction. Under this provision, homeowners can subtract up to $10,000 of paid property tax from their federal taxable income. To qualify, homeowners must itemize their deductions on their federal tax return, a step that requires careful consideration and calculation.

In Colorado, seniors have an additional avenue to lessen their property tax burden – the senior property tax deduction, also known as the Senior Homestead Exemption. Established in 2002, this exemption allows eligible seniors aged 65 or over on January 1st, who have lived in their homes for a minimum of ten years, to exempt 50% of the first $200,000 of their property’s value from taxation. That works out to a $100,000 deduction for most seniors in the state. In 2023, this deduction could mean significant savings, especially considering the trend of rising property values in Colorado.

However, one must not overlook the crucial stipulation in the senior tax deduction policy. The state legislature has the discretion to fund or suspend the exemption in any given year, depending on the state’s budget. Given the shock of this year’s property taxes, legislatures didn’t dare reduce the senior citizen property tax deduction.

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