Developing the Tax Rate & CPA Surcharge
Factors That Determine Property Tax Rate
Three factors determine the property tax rate:
- The property tax levy
- The total assessed value of the community
Property Tax Levy
The tax levy is the amount of money to be raised by the property tax. Each year the amount to be raised must be determined in accordance with Proposition 2-1/2. This is computed by taking the total of the previous fiscal year’s tax levy increased by 2.5 percent, plus new growth, any voter-approved general overrides, and any voter-approved debt exclusions. Increases due to new growth are based upon the increased value of new developments, additions, renovations and other growth in the tax base that is not the result of an increase in value due to market forces.
An example of other growth would be a formerly tax-exempt property which becomes taxable. The purpose of this provision is to recognize that new development results in additional municipal costs.
An exclusion is that amount of money needed to pay the principal and interest on debt incurred for special projects approved by ballot referendum for exclusion from Proposition 2-1/2 limits.
Determining the Tax Rate
The tax rate is calculated by dividing the amount to be raised by the total assessed values of all property divided by 1,000.
Tax Rate = Tax Levy (or net amount to be raised) / Total Assessed Value / 1000
This rate is expressed in terms of dollars per 1,000. For an example, if a home is assessed for $750,000 and the tax rate is $12.51, the real estate taxes would be computed as follows:
$12.51 X ($750,000 / 1,000) = $9,382.50
The amount to be raised through taxation is determined by Town Meeting each fiscal year and the provisions of Proposition 2 ½. The Board of Selectmen votes annually whether or not to shift the tax base and the tax rate on every year.
Determining the Community Preservation Surcharge
The community preservation surcharge is calculated by the following:
Total Assessed Parcel value less $100,000 (for residential properties only) / 1000 X the tax rate X 3%
The community preservation surcharge is expressed in terms of dollars per 1,000. For an example, if a home is assessed for $750,000 and the tax rate is $12.51, the community preservation surcharge would be computed as follows:
$12.51 X ($750,000 - $100,000 = $650,000 / 1,000) = $8,131.50 X 3% = $243.95