A b s o l u t e   F i d e l i t y   t o   t h e   C l i e n t  ™

 

 

The Lincoln Group,

Realtors®

(503)699-2239
Serving Metropolitan Portland, Oregon
including Tualatin, Tigard, Beaverton and Lake Oswego-West Linn

 

 

 

Jeff Sorg
___________

 

Principal Real Estate Broker

 

  Home

 

How Property Taxes are Calculated

The short answer:  Taxable value is based on last year's value, plus 3%, which cannot exceed the Real Market Value (RMV).

The long answer: Our property tax system has changed significantly over the past 10 years.  Limitations on property taxes were put in place twice during the past decade.  These two major changes were:

  1. Ballot Measure 5 - Taxes from fiscal year 1991-92 to 1995-96 were increasingly limited until the limit of $5 per $1,000 Real Market Value for school taxes and $10 per $1,000 Real Market Value for general government taxes was reached.

  2. Ballot Measure 50 - This is a property tax limitation measure which was approved by Oregon's voters in May 1997.  The provisions in this measure:  rolled 1997 assessed values back to 90% of the 1995 value, established permanent rate limits for each tax district; allowed voter to approve local option levies outside these rates; established a method for taxing new property at a ratio of market value to the Maximum Assessed Value (giving similar tax savings to the new property); and limited the growth of Maximum Assessed Value for existing property to a maximum of 3% each year.

 Property Assessment

Each individual property is taxed on its assessed value.  A property's assessed value is the lower of its real market value or its maximum assessed value.  Each year, the county assessor determines the property's real market value and calculates its maximum assessed value.  You are taxed on the lesser of the two, which is called the assessed value.  Real market value and maximum assessed value are defined below.

 Real Market Value

Oregon law says the assessor must value all property at 100 percent of its real market value.  Real market value (RMV) is typically the price your property would sell for in a transaction between a willing buyer and a willing seller on January 1, the assessment date for the tax year.  To estimate the initial RMV for your property, your county assessor appraises your property using a physical inspection and a comparison of market data from similar properties.  For ensuing tax years, your county assessor may study trends of similar properties to update the RMV for your property.  Some property, such as farm or forest property, may be subject to special valuation processes.

 Maximum Assessed Value

A property's maximum assessed value (MAV) is the taxable value limit established for each property.  The first MAV for each property was set in the 1997-98 tax year.  For that year, the MAV was the property's 1995-96 real market value minus 10 percent.  For example, if a residential property had a real market value of $100,000 for the 1995-96 tax year, its 1997-98 MAV would have been $90,000.  MAV can increase for only two reasons:  a three (3) percent annual increase, or specific property events.

 Assessed Value

Your taxable value is based on last year's value, plus 3%, which cannot exceed the Real Market Value (RMV).

If you made a change to your property such as new construction, rezoning, or subdivision, your new assessed value can increase by more than 3%. The value attributed to these changes is called an "exception". Some minor construction projects (less than $10,000 in one year or less than $25,000 over five years) and on-going maintenance and repairs are not exceptions and are not added to a property's assessed value.

 Assessing New or Changed Property

New property, including new construction and new lots, are assessed by multiplying the current Real Market Value (RMV) times a percentage. For example: for 2002, the ratio applied to new residential property was 70.44% of Real Market Value.

Tax Rates

Tax districts were given permanent tax rates under Measure 50. The rates limit the districts' taxing authority for operating levies unless voters approved a "local option levy".

Local Option and Bond Levies

Your tax districts can request additional taxes for bonds or operation through an election. These local option levies and bond levies usually require double majority approval. That is, both a majority of voters must participate in the election, and a majority of those must vote yes.

An example of a house appraised at $150,000 in the 1995-96 tax year:

1995-96

 

$150,000 RMV

1997-98 (CUT 10% FROM '95)

 

$135,000 MAV*

x permanent rate for each district
+ bonds and local option levies

 

1998-99 (CAP at 3% per yr.)

$135,000(97-98 MAV)+$4,050 max increase
=$139,050 (98-99 MAV)*
x permanent rate for each district
+ bonds and local option levies

= TAXES

= TAXES

* MAV = Maximum Assessed Value

Three Percent Increase

For tax years after 1997-98, MAV is defined as the greater of the prior year's MAV or the prior year's assessed value increased by 3 percent.  This means that the MAV may increase 3 percent per year.  There are two exceptions to the 3 percent increase.  If the RMV is less than the MAV for two years, the MAV will not increase.  Certain property events, such as new construction, can cause the MAV to increase more than 3 percent.

Property Events

The MAV can increase by more than 3 percent for any of the following property events:

  1. Changes in the property value as the result of new property or new improvements to property;

  2. The property is partitioned or subdivided;

  3. The property is rezoned and used consistently with rezoning;

  4. The property is first taken into account as omitted property, or

  5. The property becomes disqualified from exemption, partial exemption or special assessment.

New construction affects MAV if it increases the value of the property by more than $10,000 in any one year or $25,000 within any consecutive five years.  These changes will always have an effect on RMV, although they may not have a dollar-for-dollar impact on MAV.