How Property Taxes are Calculated

Step 1: Basic Calculation of Property Tax

To compute the property taxes for a parcel of property the assessed valuation is multiplied by the tax rate. The following examples show how the taxes are calculated on a representative house and a typical personal property account based on this formula: **Taxable value X 35% = assessed value.  Assessed value X tax rate = property taxes due.

REAL PROPERTY -$200,000.00 (taxable value) X 35% = $70,000.00 (assessed value) X 0.0298 (tax rate) = $2,086.00 (tax liability)
PERSONAL PROPERTY -$10,000.00 (taxable value) X 35% = $3,500.00 (assessed value) X 0.0298 (tax rate) = $104.30 (tax liability) 

Step 2: Calculating Tax Relief With the Provisions of AB489 Tax Relief (NRS 361.4723)

During the 2005 session of the legislature a tax relief package was passed that caps property tax increases as follows (assuming no change to the property):

Owner occupied primary residences and rental properties charging rates at or below the Department of Housing and Urban Development fair market rents may not have a tax increase from year to year of more than 3%. Parcels may still increase less than 3% or go down. All other property including vacant, commercial, industrial, second homes and higher rate rentals will be capped at between a low of 2 times the annual increase in the Consumer Price Index and a maximum of 8% depending on the growth rate in each individual County. In Douglas County: The 2005/06 tax cap was 7.3% based on the 10-year average assessed value growth. Properties in this situation did not exceed a 7.3% tax increase.

Since the 2006/07 fiscal year rates have ranged from 8% to .2% based on the same formula.

Property With Changes From the Previous Year
Parcels with new construction, parcel splits and changes in zoning or use may not receive the benefit of the tax cap the first year. These values are considered "new" to the roll and are taxed at the full rate. A property with some existing and some new value such as an addition to an existing house will get a combination of existing value subject to the cap and new value taxed without benefit of the cap.

Reconciling The Calculation Above With the Tax Cap
The 2005 legislature did not change the method of property tax assessment or the initial tax calculation. What the legislature did do is to put a limit on how much taxes can increase from year to year. For fiscal year 2005/06 and forward taxes are computed in two steps. First the tax is calculated as figured in the previous example and second, the prior years taxes are multiplied by the appropriate cap (3% or 8% for Douglas County) to determine the maximum tax allowed for the current year. Property taxes cannot exceed the amount established by the second step. Any amount by which the first calculation exceeds the second calculation is termed as "abatement". This abatement is the benefit provided to the taxpayer directly as a result of the legislation.

It is important to note that the taxable value is determined by calculating the replacement cost new less depreciation of any particular item. Real property is depreciated on a straight line basis over 50 years, at 1.5% per year. Personal property varies widely. It may be best to contact the assessor's office for specific personal property questions you can't find answers to on our website.