According to the Denver Assessor’s Office, there are four distinct parts used to determine property tax:

1. Actual Value. This amount is provided by the assessor and is generally based on the market value of the property and analysis of comparable sales.
2. Assessed Value. This amount is determined by multiplying the actual value by the assessment rate.
3. Assessment Rate. This is set annually by the State legislature. Since 2002, commercial real estate is assessed at 29 percent, while residential properties, including apartments, are assessed at 7.96 percent.
4. Tax Rate. This is determined each December by the taxing authorities listed on the tax bill. These tax rates are expressed as decimal fractions more commonly referred to as millage or mills (one mill = $0.001). Last year, Denver’s combined Mill Rate was 84.071 mills, which translates into a tax rate of $0.084071 for every dollar of Assessed Value.

A property’s taxes are calculated by using the appropriate assessment rate to adjust a property’s actual value, resulting in the property’s assessed value. Next, the applicable tax rate is applied to the property’s assessed value, which will then provide an estimate of the taxes to be paid. This may sound complicated, but it can be illustrated by a simply equation:

(Actual Value x Assessment Rate) x Tax Rate = Taxes

Example A: A single-family residential property in Denver, valued at $225,000

($225,000 x 0.0796) x $0.084071 = $1,505.71 in taxes

Example B: A commercial real estate property in Denver, valued at $225,000

($225,000 x 0.29) x $0.084071 = $5,485.63 in taxes

These two examples illustrate the difference in how these two classifications can affect the tax assessed to the property owner. If you feel your property is incorrectly classified in the valuation, you can appeal the assessor’s decision in a series of steps detailed in our next segment.

Contact Montegra to find out more about real estate taxes and our commercial real estate loans.

This blog was written by Bob Amter, President of Montegra Capital Resources, LTD., a Colorado hard money lender.  [google_authorship] has been in the private capital lending business for 41 consecutive years.