Colorado is known for its stunning landscapes, growing economy, and rapidly expanding population. Yet one aspect that often surprises newcomers and real estate investors alike is the low property tax rates. But why is property tax in Colorado so affordable compared to other states? In this article, we’ll explore the factors that keep property taxes low and what it means for homeowners and real estate investors.

What Makes Property Tax in Colorado So Low?

Colorado’s Gallagher Amendment

One of the primary reasons property tax in Colorado is lower than in many other states is due to the Gallagher Amendment. Passed in 1982, this amendment established a formula for determining property tax rates based on the value of residential and commercial properties.

In essence, it ensures that the majority of property tax revenue comes from commercial properties rather than residential ones. By keeping residential property tax rates lower, the amendment has helped maintain affordability for homeowners and real estate investors alike. Although the amendment was repealed in 2020, its long-term effects continue to influence property taxes today.

Fixed Mill Levy Rates

Another contributing factor is Colorado’s mill levy system. A mill levy is a tax rate applied to the assessed value of a property, and in Colorado, this rate remains relatively low compared to other states. For example, the average property tax rate in Colorado is approximately 0.51%, according to SmartAsset, whereas the national average is closer to 1.07%.

Assessed Property Values

In Colorado, the property tax you pay is based on a percentage of your home’s assessed value, not its full market value. As of 2023, residential properties are assessed at 7.15% of their market value. This means if your home is worth $500,000, your taxable value would only be $35,750. This reduced taxable value contributes to why property tax in Colorado remains affordable for homeowners.

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