Covering Your Assets: Assessing Nevada’s real property tax paradox (Voices)

Did you know the county assessors are starting the process of reappraising real estate each parcel of real estate?

While Nevada Revised Statutes require each parcel be reappraised every 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 property tax 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 requires its assessors use the 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: 35% of taxable value.

Property tax: Assessed value times the tax rate.

Full cash value: Otherwise known as fair market value. Determined by either the market or income approach.

Market approach: Look at similar properties that have sold, adjust for the differences, and estimate the price the subject property might sell for.

Income approach: Estimate 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 (note: this is not used for personal residences).

Property Tax FAQ

• Am I overpaying my property tax? If the taxable value exceeds full cash value, you may still not overpay tax if the tax cap has limited the amount of tax you are paying.
• 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 December 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 December 31, 2020.
• What is the property tax cap? It is the maximum amount your bill can go up per year. There are two caps, the 3% cap and the 8% cap.
• Who is eligible for the 3% 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% 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% tax cap, is there a limit on how much my bill will increase? Yes, your maximum tax increase should be limited to 8%. With the declination in values this year, many property owners’ tax bills are still increasing. 

What are the important dates?

• NOW: Contact your assessor now to determine the projected assessed value of your real property. Go to washoecounty.us/assessor or accessclarkcounty.com/assessor for contact info.
• January 1, close of real property roll: Deadline for mailing value notices to property owners (mid-December when it goes to print).
• January 15: Deadline for appeals to County Board of Equalization.
• March 10: Deadline for appeals to State Board of Equalization.

Conclusion

A solid understanding of the correct terminology is mission critical to understand if your property is tax correctly. For example, many notices you receive discuss the “assessed” value.

This assessed value is the result of multiplying the taxable value by 35%. 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% and compare the result to what the property is worth.

Another important item to understand is how the property cap impacts your tax bill. Make sure the assessor has correctly noted that your residence in their system. 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 website and looking at the details of quality class, building size, etc.

Under a mass appraisal system, you might be surprised to find that the “in-law quarters” that you never built but did receive a building permit to build was added to the square footage of your home.

If you have questions, the assessor’s office can be helpful. Under the taxpayer’s bill of rights, you have a right to an assessor’s office with an “open door” policy.

This includes prompt and courteous attention whenever you have a question concerning any aspect of your appraisal, and access to complete details that set forth the assessor’s procedures for assessing your property, including a copy of your appraisal records, in addition to  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 contact them, the more likely they will have time to fully discuss the property with you.

Mike Bosma, CPA, is Principal-in-Charge of the Reno office of CliftonLarsonAllen LLP. His weekly NNBW column, “Covering Your Assets,” focuses on effective planning strategies for every business owner. Reach at mike.bosma@claconnect.com.