Colorful Commentary

Property taxes in Colorado nearly the lowest in the nation

Posted March 9, 2017 by Chris Stiffler
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property tax rankings by state

By Chris Stiffler

CFI Economist

How do property taxes in Colorado compare to those in other states? Before we answer that, let’s start with the basics.

Your property tax bill is a function of three factors: the market value of your home, the statewide assessment rate (what portion of your home’s value is subject to taxes) and the local tax rate applied to your home (called the millage rate). If you own a $350,000 home in Colorado, you pay on average $2,103 in property taxes.

These tax rates vary across different districts in Colorado. For instance, while the owner of a $350,000 home in Denver pays about $2,293 a year in property taxes, that property tax on that same home in Gunnison would be about $1,722 because of the various millage rates (think tax rates) across counties and schools districts. This also means that as the value of your home increases, as we have seen with steep increases in home values along Colorado’s Front Range, your property tax bill also will increase.

Where do those property taxes go?

About half of the tax revenue goes to fund your local school district, while the other half is split between the county, the city and some special taxing districts set up for specific purposes (such as fire protection districts and sewer/sanitation districts). All property tax revenue stays in the local district, with none of it going to the state.

property tax ranking chartsWhat if you picked up that same $350,000 house and moved it to Texas? Then you’d see your property taxes more than triple. The owner of a $350,000 home in Texas pays $6,635 in annual property taxes. If that $350,000 house were in Kansas, $4,903 would be owed each year in property taxes. In Nebraska, the homeowner would pay $6,482 a year.

When you rank states by effective home property tax rates (basically, total property taxes divided by home value), Colorado ranks 44th  — meaning only six other states have lower property taxes on homes than Colorado. It is also important to remember that a state’s revenue comes from property taxes, income taxes and sales taxes. So while Texas has no income tax, the Lone Star State’s property taxes are among the highest in the country.

Just because Colorado’s property taxes rank as some of the lowest in the country doesn’t mean they are affordable for all homeowners. Retired seniors, who are typically on fixed incomes, can have a hard time paying their property tax bills, particularly if the value of their home (and therefore their property taxes) has increases dramatically. This is why Colorado has a property tax break for seniors called the Senior Property Tax Homestead Exemption.

This property tax break for seniors saves the owner of a $350,000 house on average $600 a year. Local schools and local fire departments don’t lose out on that $600 because the state reimburses local governments for the exemption. This ultimately means that the state pays the tab.

But the homestead exemption is not always available each year. The legislature has the power to change the size of the credit and can even lower it to zero during tough budget years. The homestead exemption costs the state about $140 million each year. It has also been one of the things that might be cut to help bridge the budget shortfall this year.

 

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