While working with a buyer recently, I was asked a great question: “Can selling a property trigger a significant increase in property taxes?” My initial understanding was that Oregon has a 3% cap on annual property tax increases. However, I wasn’t 100% sure, so I reached out to the Multnomah County Taxation Office for clarification.
Here’s what I learned, and it’s more complicated than I initially thought.
The 3% Cap: What It Actually Applies To
In Oregon, there is indeed a 3% cap on increases, but that cap only applies to the maximum assessed value (AV) of a property—not necessarily to the total tax bill. So, while your property’s assessed value can only go up by 3% annually under most circumstances, your actual tax bill could increase by a larger percentage depending on several factors.
The Multnomah County Taxation Office explained that there are three key scenarios where property taxes could increase more than 3%:
- Addition of a new structure – for example, adding a garage or an accessory dwelling unit.
- Improvement to an existing structure – like a major renovation or remodel.
- Subdivision or partition of the property – splitting your land into multiple lots.
These exceptions, known as exception events, can lead to higher property taxes because they affect the assessed value of the home.
Levy Codes and Property Taxes
Here’s where things get tricky: your levy code matters. The tax rate you pay is affected by your levy code, which varies across different areas of the city. For example, your next-door neighbor could be in a different levy code zone, resulting in different property taxes, even if your homes are similar. Levy codes factor in various local taxes, making it difficult to predict how much taxes will increase after a property is sold.
In short, while selling your property can trigger a reassessment, the amount of increase is influenced by several variables, making it tough to pinpoint exactly how much taxes will rise.
Why Are My Taxes Higher Than My Neighbor’s?
Many homeowners wonder why their taxes are higher than their neighbors’. There are a few reasons this might happen:
- Property improvements: If your home has undergone significant improvements—such as a remodel or an addition—your taxes may be higher.
- Property characteristics: Differences in square footage, lot size, condition, and construction quality can also impact your assessed value and taxes.
- Exemptions: Your neighbor may qualify for a tax exemption that you don’t, which could lower their bill.
Why Did My Taxes Increase So Much?
In Oregon, it’s important to note that tax amounts can increase by more than 3% annually, even though the assessed value of your property may be capped at a 3% increase. The factors driving a higher tax bill include:
- Changes in the tax rate for your levy code area
- Loss of compression savings
- Exception events like new construction, major renovations, or property subdivision
For example, if you remodel your home and the improvements are valued at more than $18,201 in a single year, or $45,000 over five years, the county could reassess your property, leading to a higher tax bill.
Key Takeaways
The bottom line is that selling your property can trigger a reassessment of your taxes. While Oregon does have a 3% limit on assessed value increases, this cap doesn’t always apply due to various exceptions. Additionally, your tax bill can increase significantly depending on levy codes, local tax rates, and any improvements or additions made to your home.
One thing to keep in mind is that property taxes in Multnomah County are already high. For example, on a $1.3 million home, property taxes could be as much as $24,000 a year—that’s $2,000 a month, which could even be higher than your mortgage payment. So when you’re shopping for a home, make sure you consider not just the purchase price, but also the property taxes. It’s as important as looking at the mortgage and insurance costs.
A Final Thought on Property Taxes
When you’re voting for tax increases, keep in mind that while the short-term benefits might seem worthwhile, they can have long-term impacts on the affordability of your home. Over time, rising property taxes can significantly affect the overall cost of homeownership, particularly if you plan to stay in your home for many years.
If you have any questions about real estate (or property taxes), I’m here to help! Also, if you found this blog helpful, I’d appreciate it if you could subscribe to my newsletter to stay updated on more real estate tips.
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Disclaimer: The content in any of Shawn Yu (Shawn Realty) Youtube videos or this website shall not be construed as tax, legal, insurance, construction, engineering, health & safety, electrical, financial advice, or other & may be outdated or inaccurate. Shawn Yu/Shawn Realty is a licensed principal real estate broker/brokerage doing business in Oregon. To contact Shawn Realty for selling, buying investing in Oregon, please email shawn@shawn-realty.com or call 503-515-4499.
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