As mentioned in part 1, Colorado has some of the lowest residential property taxes in the U.S., making home ownership attractive. Taxes on vacant land with the agriculture tax classification are also extremely low. Following is a study on how property taxes are determined in Colorado.
The assessor establishes the value of properties based on comparable properties that have sold in a 2-year period prior to the appraisal date. Taxing authorities that provide services establish their mill levies (a mill is 1/10th of a penny or $1 revenue per $1,000 of assessed value) based on the total of all property value in the service area. Property tax is calculated by multiplying the market value by the tax rate (7.15% in 2019 for residential and 29% for non-residential) and the mill levy. For example, a residence valued at $1,000,000 multiplied by the 7.15% tax rate would result in an assessed value of $71,500. Various entities have taxing authority such as the county, the school district, the community college, water district, fire services, library, museum, social services, etc. In this example, the total mills levied by all of the public service providers for area of the home is 58.079. This number multiplied by the assessed value and divided by 1,000 results in the tax due of $4,152.65. Another way to calculate would be to apply $1 per $1,000 in value. In this example, it would be $71.50 x 58.079 total mills for $4,152.65.
Non-residential properties are calculated with the same formula, but the tax rate is 29%. A $1,000,000 commercial property or non-ag vacant land parcel in the same service area as the residential property above would be multiplied by 29%. Assessed value would be $290,000 and the 58.079 mill levy multiplier would result in a tax due of $16,842.91. When a residence is constructed on a non-ag parcel of land, the tax rate of the total assessed value decreases from 29% to 7.15% and it is not uncommon to see the tax bill decrease.
Land with ag status is valued based on the agricultural earning capability of the land. Market values do not come into play on these types of properties and the savings on non-residential parcels with ag status can be significant. A vacant parcel of ag land that would sell for $1,000,000 may only be taxed at a couple hundred dollars a year. Once a residence is put on the land, the residential tax rate (7.15%) is applied to the total assessed value of the land (ag or non-ag) and improvements.
Property taxes collected in each county stay in the county and do not fund state services.
