I am often asked by prospective home purchasers, “Joe, I have been looking at several homes all in the same price range, but the taxes on some are twice as high as others. What gives?” Have you wondered this yourself? Or, have you looked at your home’s assessed value and thought it should be different? If so, here’s the skinny…
Washington County, Utah, home to the City of St. George, Zion National Park, over a dozen golf courses, and incredible natural beauty, has become Utah’s vacation haven. In recent years the greater St. George area has been one of the fastest growing areas in the US, attracting hoards of people seeking their own piece of vacation paradise. In order to incentivize people to live in Washington County year-round, the County grants a 45% discount on property taxes to those who choose to make their home in Washington County their primary residence.
Let’s look at an example. Take a home that has been assessed by the Washington County Assessor to be worth $200,000. The assessed value of a property is simply the assessor’s opinion of market value, or the price you might expect it to sell for on the open market. There are three parts to the equation for calculating your property tax: Property Tax = Assessed Value x Tax Rate. The County Assessor does not set the tax rate. That’s the job of the city or town in which you live. Some cities and towns have higher taxes than others, but in Washington County, the average tax rate among the various municipalities is approximately 1.34%. With the assessed value in our example, and the average tax rate, the property taxes for a non primary residence are approximately $2,673. If you declare your property to be your primary residence, then you qualify for the 45% discount, and your taxes would be approximately $1,470; an annual savings of $1,203! For specific information about individual municipalities, see figure 1.
In a nut shell, the County wants to keep your money local. They want you to buy groceries locally, spend money at local gas stations, and in general, contribute to the local tax base. When you spend your money locally, the County easily makes up for the discount they give you on your property taxes.
“Property taxes are an important source of revenue for public (K-12) schools, law enforcement, fire departments, libraries, streets and roads, city and county government. As in most states, property taxes are the backbone of funding for local government and schools. Generally, public (K-12) schools receive the largest share of the property tax.” — Washington County Assessor’s Office Website
Have you ever looked at your home’s tax assessed value, and thought it should be different? There are a lot of reasons why assessed values are not a perfectly accurate reflection of your home’s value. According to Utah state law, the assessor is only required to visit your property once every 5 years, yet the assessor is also charged with the challenge of estimating the value of each property as of January 1st each year. A lot can change in 5 years; you could have added a swimming pool, a garage, finished a basement, neglected maintenance, caused damage, or made other changes. All of these potential changes would obviously have an impact on the market value of your home. Adding to the confusion is the fact that you don’t receive your tax notice in the mail until the fall, and taxes aren’t paid until November, but the value they give you is the estimate as of January 1st that year. In Southern Utah, we have ridden the property value rollercoaster, and have seen the swings in prices that can happen over short periods of time. If you’re looking at your statement from the tax man in November, just remember, that information is almost a year old, and your home’s current market value could be dramatically different.
For all of you home buyers and sellers, if you are curious about the value of a property, don’t put all of your eggs in the assessed value basket; contact a real estate professional for up-to-date market data.