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Bolling: Did You Know That Assessments Can’t Raise Your Real Estate Taxes, But Your Board of Supervisors Can?

I received my annual real estate assessment notice this week. You may have received on as well.

My personal assessment increased 8.34% this year, after going up 8.98% last year. Over the past four years, my assessment has gone up 28.25%! That’s a big hit!

Most people mistakenly assume that an increase in their real estate assessment will automatically result in an increase in their real estate taxes, but did you know that’s not how it works in Virginia?

In Virginia, an increase in real estate assessments cannot, by state law, result in an increase in a local governments total real estate tax collections that exceeds 1%. If it does, state law requires that the existing real estate tax rate be “rolled back” to offset the impact of the assessment. This is called the “equalized tax rate.”

Here’s an example.

If your locality’s real estate tax rate last year was .81/$100 of assessed value, as is the case in Hanover County where I live; and your localities assessments go up by an average of 10%, your statutorily required “equalized tax rate” would “roll back” to .73/$100 of assessed value.

This is just a generic example, but do you see how it works? The real estate reassessment did not result in higher real estate taxes. If the Board of Supervisors wants to increase the equalized tax rate it must vote to do so.

Now here’s what many localities will do. They will vote to retain their current tax rate (.81/$100 in assessed value in the example I gave above), and then celebrate the fact that they did not raise the tax rate. While that is technically true, the reality is that they raised your taxes because they voted to reset the tax rate at .81/$100 of assessed value, rather than adopt the equalized tax rate of .73/$100 that was provided for in law.

Hanover County has done this for several years now, and your locality may have done the same. Our real estate tax rate has not increased in several years, but my overall tax bill has gone up by 28.5% in the past four years because the Board of Supervisors voted each year to increase the actual tax rate above the statutorily required equalized rate. Make no mistake, that is a tax increase, and big one!

Now, as a former local government official, let me acknowledge that this may be entirely appropriate if done transparently. Your locality may need more money to fund local programs. Since the real estate tax is the primary source of local tax revenue, your Board of Supervisors may feel they have no choice but to reset the tax rate at its prior level to increase local funding. But if that is the case, be aware that they are voting to raise your taxes and hold them accountable.

Here’s the bottom line, the only way your real estate tax bill will increase is if your local Board of Supervisors votes to set their actual real estate tax rate at a rate higher than the statutorily required “equalized tax rate.”

So, if your tax bill goes up, it’s not because of a reassessment. It’s because your local Board of Supervisors voted to do so.