The property value appraisal notices have come as a shock to many property owners throughout our area – this below statement from the Montana Association of REALTORS® has been a very helpful piece for multiple clients in helping with understanding how the process works and what the actual ramifications are of dramatically increased tax basis assessment. We’d highly suggest reading the Montana Free Press article linked at the bottom of the text.
How will the recent reappraisal and increasing property values affect your taxes?
The bad news is that your property taxes will probably increase. The good news is that in most cases, the increase in your tax bill will only be a fraction of your property’s increase in value.
Property tax appraisal letters were recently mailed by the Montana Department of Revenue. You may appeal the valuation if you disagree with it. The instructions to initiate an appeal are in the letter you received. If you wish to appeal, do not delay as you only have 30 days from the date in the letter to do so. Be aware that if you appeal, the valuation may increase if your property was undervalued.
Home and commercial property values have increased rapidly, so it is no surprise that appraisals have followed suit. Taxpayers are rightfully concerned about their upcoming tax bills. Keep in mind that your estimated tax bill in the appraisal letter is required by state law to be based on the number of mills levied last year. Due to increased property values, many cities and counties must reduce their mill levies because of a statewide cap on growth of property tax revenues. School district budget growth is also capped and they, too, will likely need to reduce their mill levies due to increased values. Consequently, your tax bill in November may be significantly lower than the estimate in your appraisal letter.
An increased value is only part of why your property taxes increase. Most of the property taxes you pay fund local governments, various local taxing districts like rural fire districts, and local schools. If local elected officials or school districts decide to raise their mill levies to create more tax revenue than the cap allows, the increase must be approved by voters. Carefully review your ballot, whether for primary, general, school district, or special elections as it may contain proposed property tax increases. As a voter, you decide whether the capital investment or services to be funded are worth the cost.
The State of Montana also levies property taxes to equalize local school funding and for the university system, though the amount is only about 15% of your tax bill. One important difference is that growth of the revenue from these state mills is not capped, and the state will receive a windfall due to increased values.
Earlier this year, the Montana Legislature passed a law that will go into effect in 2025 that will direct $30 million-plus per year to county retirement funds which will reduce property taxes. They also increased the income and value limits for the Property Taxpayer Assistance Program, which will help fixed income homeowners. In addition, the legislature passed law requiring the State of Montana to provide income and property tax rebates to Montana taxpayers. Still, there is much more to be done towards tax reform that provides broad and long term relief for property owners.
- Rebates of up to $675 from the State of Montana will be made available to Montana residents for property taxes paid on their primary home in 2022 and 2023. You will need to apply to claim the rebate for 2022 taxes beginning August 15, 2023 and by no later than October 1, 2023. The rebate for 2023 taxes paid will be available in the fall of 2024.
- Income tax rebates were passed by the legislature and are coming to Montana income taxpayers soon. The amount rebated will be the lesser of $1,250 per taxpayer or the amount of state income taxes paid. Refer to line 20 on your Montana income tax return. You will receive your rebate in July 2023 either via direct deposit or check.
- The Department of Revenue is holding public meetings across the state to help taxpayers understand the property valuation process and how the department determined the new values on their classification and appraisal notices.
- The Montana Free Press created an excellent guide to how property taxes work (with pictures!)