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One look at the word “TAXES” can turn your new-home daydream into a stomach-churning nightmare. Better to be prepared on the front-end, however, than to be surprised down the road. Building a new home requires many financial considerations, one of which is property taxes. Luckily, Colorado has some of the lowest residential property taxes in the country. An average effective rate of just 0.55% (Source) places our state well below the national average of 1.08%.
Property taxes (sometimes referred to as millage taxes) are a tax levied on property by county governments. The rates are determined county by county and are percentages of your home’s assessed value, meaning the higher the value of your home, the more you’ll have to pay.
Taxing authorities in Colorado calculate tax rates based on how much revenue they need. That means rates change frequently as their revenue needs shift. While paying taxes isn’t enjoyable, it is consoling to know property taxes go towards some pretty important things including schools, roads, police, fire department, sanitation, recreation, libraries, and local government salaries. In Colorado, 100% of property tax revenue stays within the county in which it is collected, meaning none of it goes to the state.
Property taxes on new construction are based upon the assessed value of the land until a certificate of occupancy for the home has been issued by the local government. Once this occurs the property will be re-assessed as a home for the next complete property tax billing cycle.
Once the home has been built, property taxes are collected on a county level, and each county in Colorado has its own method of assessing and collecting taxes. An effective tax rate is the amount you actually pay annually divided by the value of your property. So if you pay $1,500 in taxes annually and your home’s market value is $100,000, your effective tax rate is 1.5%.
Property taxes are assessed every year based upon the budget of the local government. The assessed value of homes are assessed in two-year cycles, with values being based entirely on comparable sales.
While it’s best to consult with a financial advisor who can determine and explain your property’s specific taxes, there are calculators such as this one that can provide property tax rates for each county in Colorado.