Did you know that the county assessors are starting the process of reappraising each parcel of real estate? While the Nevada Revised Statutes require that each parcel be reappraised each five years, the practice of Washoe and Clark Counties is to reappraise each year. To understand how your real property is taxed, you must first understand some critical definitions:
Taxable value: Each county assessor is required by Nevada law to assess all real property improvements at current value, which is represented by the replacement cost of the improvement less depreciation and market value of the land. Nevada Administrative Code requires the Nevada assessors to use Marshall & Swift Building Cost Service to determine improvement replacement costs, minus depreciation. The land is then appraised at market value. Marshall & Swift costs are updated each year to reflect current building costs. The value of the land plus the value of the improvements is referred to as taxable value.
Assessed value: This is set at 35 percent of taxable value.
Property tax: This is the assessed value multiplied by the tax rate.
Full cash value: Otherwise known as fair market value, this is determined by either the market or income approach.
Market approach: This involves looking at similar properties which have sold, adjusting for the differences and estimating the price the subject property might sell for.
Income approach: This involves an estimate of the amount of money the subject property might rent for based on similar properties that are being rented. Divide the annual income, after expenses, by a reasonable interest (capitalization) rate which would be determined by market rates.
(This approach is not used for personal residences.)
Some frequently asked questions about property tax include:
Am I overpaying my property tax? If the taxable value exceeds full cash value, yes you are overpaying your property tax.
When I look at comparable sales under the market approach, what sales are relevant? The assessor is required by statute not to look at sales that occurred after July 1, 2010. As a matter of practice they will look at sales between July 1 and Dec. 31, 2010, if you bring them to their attention.
What is the date that I am valuing the property? The date the taxable value is set is Dec. 31, 2010.
What is the property tax cap? It is the maximum amount your bill can go up per year. There are two caps, the 3 percent cap and the 8 percent cap.
Who is eligible for the 3 percent tax cap? All owner-occupied homes (including single-family homes, condos, townhouses and manufactured homes) that are used as primary residences qualify for the 3 percent tax cap. Also, rental units may be eligible if all the units are rented for equal to or less than the HUD median market rents.
If I do not qualify for the 3 percent tax cap, is there a limit on how much my bill will increase? Yes, your maximum tax increase should be limited to 8 percent. With the declination in values this year, many property owners' tax bills are still increasing.
What are the important dates?
Now: Contact the assessor to determine the projected assessed value of your real property.
Jan. 1: Close of real property roll, deadline for mailing value notices to property owners (actually mid December when it goes to print).
Jan. 15: Deadline for appeals to County Board of Equalization.
March 10: Deadline for appeals to State Board of Equalization.
A solid understanding of the correct terminology is mission critical to understand if your property is taxed correctly. For example, many notices you receive discuss the "assessed" value. This assessed value is the result of multiplying the taxable value by 35 percent. Do not make the mistake of comparing the assessed value to the what the property is worth. You must divide the assessed value by 35 percent and compare the result to what the property is worth.
Another important item to understand is how the property cap impacts your tax bill. Note that if your tax did not increase in a prior year because of the tax cap, that your tax may increase even though your property is worth substantially less this year.
All property owners should make sure that the physical characteristic of their property is correct. This is as simple as searching for the property on the assessor's Web site and looking at the details of quality class, building size, etc.
If you have questions, the assessor's office can be very helpful. Under the taxpayer's bill of rights, you have a right to an assessor's office with an open-door policy, to prompt and courteous attention from the assessor's office whenever you have a question concerning any aspect of your appraisal, and to complete details that set forth the assessor's procedures for assessing your property, including a copy of your appraisal records; and sales and other data upon which your appraisal is based.
Remember that with the current budget cuts, the assessor's office is short-handed, so the sooner you are able to contact them regarding your property the more likely they will have time to fully discuss the property with you.
Michael D. Bosma, a certified public accountant, is managing shareholder of Bosma Group P.C. in Reno. Contact him at 786-4900 or mbosma@thebosmagroup.com.
