#1Senate Joint Resolution 14 Senate Committee on Revenue and Economic Development • • • Overview: Calculation of Property Taxes (Applied Analysis) . Tax Base & Tax Rates Defined • Property Tax Calculation of a $150k Typical Home Comparison on Property Tax of Similar Valued Homes (New vs. Old) • • Northern Nevada Comparison ($250k, $500k, and $1M) Southern Nevada Comparison ($250k, $500k, and $1M) Questions?#2APPLIED. ANALYSIS Calculation of PROPERTY TAXES IN NEVADA A REVIEW & ANALYSIS#3The Calculation PROPERTY TAXES IN NEVADA A REVIEW AND ANALYSIS APPLIED ANALYSIS#4• Determination of Taxable Value (Tax Base) - Land: Full cash value Tax Base & Tax Rates – Improvements: Replacement cost less depreciation at 1.5 percent per year - for up to 50 years Assessment Rate: 35% of Taxable Value • Tax Rates – Vary by jurisdiction - ― Legislatively imposed cap: $3.64 per $100 of assessed value* - - Constitutionally imposed cap: $5.00 per $100 of assessed value *Note: The state imposes an additional $0.02 outside of the cap, making the effective cap $3.66. PROPERTY TAXES IN NEVADA A REVIEW AND ANALYSIS APPLIED ANALYSIS#5A Typical Home ($150,000) Taxable Value $150,000 PROPERTY TAXES IN NEVADA APPLIED ANALYSIS A REVIEW AND ANALYSIS#6! Taxable Value * Market Value PROPERTY TAXES IN NEVADA APPLIED ANALYSIS A REVIEW AND ANALYSIS#7A Typical Home ($150,000) Taxable Value $150,000 Assessment Ratio 35% Assessed Value $52,500 Taxable Rate / $100 $2.8985 Property Taxes Due $1,522 PROPERTY TAXES IN NEVADA APPLIED ANALYSIS A REVIEW AND ANALYSIS#8Property Tax Calculation Summary Typical $150,000 Home Year 1 Year 2 Year 3 Year 4 Year 5 Year 51 Cash Value of Land* $50,000 $51,250 $52,531 $53,845 $55,191 $171,855 Repl. Cost of Improvements* $100,000 $102,500 $105,063 $107,689 $110,381 Less: Depreciation Factor $- $(1.538) $(3.152) $(4.846) $(6.623) $343,711 $(257.783) Total Taxable Value $150,000 $152,213 $154,442 $156,688 $158,949 $ 257,783 Assessment Rate 35% 35% 35% 35% 35% 35% Assessed Value $52,500 $53,274 $54,055 $54,841 $55,632 $90,224 Tax Rate (Per $100 of Value) $2.8985 $2.8985 $2.8985 $2.8985 $2.8985 $2.8985 Resulting Tax Liability $1,522 $1,544 $1,567 $1,590 $1,612 $2,615 Effective Tax Rate (Tax Liability as a 1.01% 1.00% 0.99% 0.98% 0.97% 0.51% Share of Taxable Value Before Depreciation) *Note: For illustrative purposes, assumes an annual growth rate of 2.5 percent for land and improvements. PROPERTY TAXES IN NEVADA APPLIED ANALYSIS A REVIEW AND ANALYSIS#9Policy Underpinnings Nevada Is the only state In the United States that applies a depreciation factor to residential buildings (Improvements) for property tax calculations States With a Depreciation Deduction for Real Property Improvements States Without a Depreciation Deduction for Real Property Improvements PROPERTY TAXES IN NEVADA A REVIEW AND ANALYSIS APPLIED ANALYSIS#10Northern Nevada Homes with an estimated marked value of $250,000 : E 田田 Homebuyer A Sparks (89431) Year Built Homebuyer B East Sparks (89506) ➤ Year Built ☐ 1965 Estimated Market Value $248,000 ➤ Property Tax paid in 2016 $951 ☐ 2013 Estimated Market Value $267,500 ➤ Property Tax paid in 2016 $2,080 *Homebuyer B pays $1,129 more on property taxes than Homebuyer A.#11Northern Nevada Homes with an estimated market value of $500,000 : Homebuyer A North of UNR (89506) Year Built ☐ 1945 Estimated Market Value $579,900 Homebuyer B Somersett Parkway (89523) Year Built ☐ 2013 Estimated Market Value $519,900 ➤ Property Tax paid in 2016 $1,285 ➤ Property Tax paid in 2016 ■ $4,497 *Homebuyer B pays $3,212 more on property taxes than Homebuyer A.#12Northern Nevada Homes with an estimated market value of $1,000,000: TH HE Homebuyer A Old Southwest Reno (89509) Year Built ☐ 1956 Estimated Market Value $1,199,000 ➤ Property Tax paid in 2016 $4,104 Homebuyer B Southwest Reno - Chalets (89511) Year Built ☐ 2013 ➤ Estimated Market Value $1,498,000 ➤ Property Tax paid in 2016 $7,828 *Homebuyer B pays $3,724 more on property taxes than Homebuyer A.#13Southern Nevada Homes with an estimated market value of $250,000 : E 田田 Homebuyer A North Las Vegas (89104) Year Built ☐ 1963 Estimated Market Value $250,000 ➤ Property Tax paid in 2016 $794 Homebuyer B Southwest Las Vegas (89179) Year Built ☐ 2014 Estimated Market Value $249,999 ➤ Property Tax paid in 2016 $2,014 *Homebuyer B pays $1,220 more on property taxes than Homebuyer A.#14Southern Nevada Homes with an estimated market value of $500,000 : Homebuyer A Central Las Vegas (89102) Year Built ☐ 1954 Estimated Market Value ◉ $565,000 ➤ Property Tax paid in 2016 $2,244 Homebuyer B McCullough Hills (89012) Year Built ☐ 2014 Estimated Market Value $544,900 ➤ Property Tax paid in 2016 ■ $4,915 *Homebuyer B pays $2,671 more on property taxes than Homebuyer A.#15Southern Nevada Homes with an estimated market value of $1,000,000: TH HE Homebuyer A East Las Vegas (89107) Year Built ☐ 1955 Estimated Market Value $1,260,000 ➤ Property Tax paid in 2016 $2,494 Homebuyer B Southern Highlands (89141) Year Built ☐ 2014 ➤ Estimated Market Value $1,149,000 ➤ Property Tax paid in 2016 $6,709 *Homebuyer B pays $4,215 more on property taxes than Homebuyer A.#16Senate Joint Resolution 14 Senate Committee on Revenue and Economic Development Comparison Summary: Property Tax Paid under each Estimated Market Value $ 250,000 $ 500,000 $ 1,000,000 Homebuyer A $ 951.00 $ 1,285.00 $ 4,104.00 Northern Nevada Homebuyer B $ 2,080.00 $ 4,497.00 $ 7,828.00 Difference in Property Tax Paid (B-A) $ 1,129.00 $ 3,212.00 $ 3,724.00 Homebuyer A $ 794.00 $ 2,244.00 $ 2,494.00 Southern Nevada Homebuyer B $ 2,014.00 $ 4,915.00 $ 6,709.00 Difference in Property Tax Paid (B-A) $ 1,220.00 $ 2,671.00 $ 4,215.00#17$4.50 $4.25 $4.00 $3.75 $3.50 $3.25 $3.00 $2.75 $2.50 $2.25 $2.00 $1.75 $1.50 $1.25 $1.00 Value of a Dollar Before Adjustment for Depreciation (1976-$1.00) INFLATION BEFORE AND AFTER ADJUSTMENT FOR DEPRECIATION Value of a Dollar in 1976 Adjusted Each Year for the Rate of Inflation as Measured by the Consumer Price Index Before and After Adjustment for Depreciation Each Year of 1.5% Times the Number of Years from 1976 After accounting for inflation over 20 years, it would require $2.76 in 1996 to have the same purchasing power as the $1.00 in 1976. But due to the impact of the depreciation, the $2.76 is worth only $1.93 in 1996. After accounting for inflation over 40 years, it would require $4.22 in 2016 to have the same purchasing power as the $1.00 in 1976. But due to the impact of the depreciation, the $4.22 is worth only $1.69 in 2016. 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Value of a Dollar After Adjustment for Depreciation (1976-$1.00) 2008 2009 2010 2011 2012 2013 2014 2015 2016#18Senate Joint Resolution 14 Senate Committee on Revenue and Economic Development Questions?