Nevada has some of the lowest property tax rates in the country, but with home values shooting upward, some are worried about how much their tax amount will jump.
But did you know you can cap the amount your property taxes can rise each year? It’s not as difficult as you might guess. Read on to learn the basics of property taxes and all about Nevada’s 3% owner occupied tax abatement.
How is property tax assessed?
Property tax assessment is the process by which the county establishes how much tax you owe. It’s done by first determining your home’s assessed value (which is its value just for taxes) and then using your local tax rate to work out the final amount you owe.
How is your property’s value determined?
Your home’s assessed value is different than its market value. The two numbers are related, but the assessed value is lower—and that’s a good thing! While home value is usually a “bigger is better” situation, your home’s assessed value determines how much you’ll pay in property taxes, so in this case the opposite is true.
In Nevada, your property’s assessed value is determined using the replacement cost method. The assessor calculates the cost of the material and labor you’d need to replace your house—minus 1.5% for each year of your home’s age (up to 50 years) for depreciation. This value is added to the market value of the land, and the total is the assessed value.
How do we get from the assessed value to the tax amount?
After you know your home’s assessed value, there are two more steps to work out the dollar amount you actually owe in property taxes. In Nevada, you’ll only owe taxes on 35% of the tax assessor’s value of your home, so first you have to find out what that is. That number is then multiplied by the tax rate—currently 0.65%—to give you your final tax amount.
Head spinning? Let’s break it down with an example.
The current average market value for homes in Las Vegas is around $450,000. The average assessed value is 80-90% of the market value, or in this case, $360,000. But remember that in Nevada, you only owe taxes on 35% of that. 35% of $360,000 is $126,000, meaning that if your house has a market value of $450,000, you pay property taxes on $126,000.
But how much tax is that? To find out, multiply it by the current tax rate of 0.65%. For the home in our example, you’d owe $819.
But home values are skyrocketing. Doesn’t that mean taxes are too?
Home values in Las Vegas have gone up 30.1% since this time last year. If property taxes rose at the same rate, you’d pay nearly a third more than you paid last year in taxes! This is a financial strain for many, especially disabled and retired folks on fixed incomes.
That’s why Nevada has a property tax cap—to provide stability and predictability for homeowners and prevent drastic market fluctuations from affecting tax rates.
Nevada’s 3% property tax cap
Nevada has two property tax caps; one at 8% and one at 3%. This means that no matter how much home values rise, your property tax can only go up 8% or 3% in one year.
But that 5% difference is huge when you’re talking thousands of dollars. How do you get the lower rate? You have to request it. If you don’t, the higher 8% cap is automatically applied.
Who is eligible for the 3% property tax cap?
Every homeowner in Nevada can designate one property as their primary residence and apply the 3% property tax cap—also called the owner occupied tax abatement—to that property. The property must be used primarily as your residence, but it’s okay if you also work from home or if you have a rental on your property (like a casita).
Some rental properties are also eligible, but only if they fall under low-income rental limits.
How do I apply for the 3% property tax cap?
In the Las Vegas Valley, the Clark County assessor’s office mails postcards to homeowners at addresses that have had ownership, title, and other changes that may qualify them for the 3% tax cap. When you receive the card, you should sign it and return it as soon as possible to receive the lower tax cap.
Think you should’ve received a card, but didn’t? You can contact the assessor’s office at (702) 455-3882. The deadline to return the card for this year just passed on June 30th, but it’s never too soon to send it in for next year and prevent your taxes from rising more than 3%.
Keep in mind that even if you filled out the card and applied the 3% tax cap to your home in the past, certain legal changes can void it. If you refinanced your home, entered it into a trust, or engaged in another activity that involves an ownership document, your owner occupied tax abatement will be removed. In this case, you’ll have to fill out a new card to reapply the lower cap. This is done to ensure that records stay consistent and that each homeowner receives the tax abatement on one primary residence.
Want more expert home and property advice?
Get in touch. We know that hardworking Nevadans don’t always have the time and energy to devote to learning the nitty gritty of things like property taxes, investment, and finance. That’s why we use the expertise our real estate team has gained over decades in Las Vegas to break down these subjects in a straightforward way. For more, fill out the form below.
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