Property tax appraisals: A complex equation

Property tax appraisals are currently arriving in the mail. It’s important to review the valuation and appeal it if you do not agree with the valuation. The appeal instructions are in the letter that was mailed to you. You only have 30 days, so do not wait.

If the value of your property increased by 30% that does not mean your taxes will increase by 30%. However, generally if the value of your property increased, most likely your taxes will be increasing.

Property tax calculations are complex and understood by few. To calculate your taxes, you must know the formula. The calculation is: the market value of your property X tax rate X mill rate = taxes.

The tax rate on various classes of property is controlled by the Legislature. The current residential rate is set at 1.35% and has not changed for many years. Businesses have a higher rate of 1.89%.

For a residential house valued at $400,000 with 650 mills set by the local taxing jurisdiction the tax is:

$400,000 X 1.35% X 650/1,000 = $3,510

As you can see, the main item that determines your taxes is the mill rate. Mill rates are controlled by your county commissioners, city councils, school boards and voters. The more amenities your elected officials or voters desire, the higher the mill rate. If voters recently voted for new school levies, open space bonds, libraries, parks, law enforcement, new buildings, road improvements, etc., then your taxes will increase as a result of these voter-approved levies. A $400,000 house in Missoula will not pay the same taxes as a $400,000 house in Helena due to different mills set in each city, county and school.

Local elected officials can decrease or increase mills as market values change; however, they can only increase revenue raised in the previous year by one-half the rate of inflation plus new growth from new properties. If they want to increase beyond this amount, they must get voter approval.

During the 2023 legislative session I passed Senate Bill 332 which will require local governments to inform voters how much their proposed budgets will increase property taxes. If you are concerned about your property taxes, you need to attend meetings of your local government and school boards during their budget setting process because 85% of your property tax bill is controlled locally. Also, as voters, you need to consider every levy you vote for, and keep in mind that if you vote yes, your taxes will increase.

Unfortunately, many voters fail to vote when they have the opportunity and oftentimes a minority of the voters who do vote will increase your taxes. You can control your property taxes, but you must get involved with your local governments and support legislators who attempt to place reasonable limits on how much and how often local governments can increase your property taxes.

Sen. Greg Hertz, a Republican from Polson, chairs the Legislature’s Senate Taxation Committee.