New Mexico is not alone when it comes to property tax lightning. It has plenty of company in many states across the USA and it takes on many different forms depending on where you live.
If you are unfamiliar with the term, "tax lightning” occurs when someone buys a home, (often thinking that the property tax rate in effect when they purchased will continue) and at the next property tax assessment their home’s taxes are adjusted to a new and often much higher rate based upon their purchase price.
In New Mexico, buying a home often triggers that massive increase in property taxes because the new home you are purchasing is not covered under the state’s 3% annual assessment cap.
Once your new home’s assessed value is increased to at least 85% of market value in the year after you buy it, you could end up paying property taxes that are three times as much as the previous owner.
This scenario repeats itself over and over in New Mexico based on a 2001 state law that imposed the 3% cap.
Part of that law was struck down last year when a district judge ruled that portions of it violate the state constitution.
That ruling has called the 2001 law into question and is putting additional pressure on state legislators to address the issue.
Earlier this year, the New Mexico State Senate passed SB 160 – a bill designed to address some of the issues with property tax lightning. If this bill becomes law it will allow the 3% property valuation cap to remain in place even when there is a change of ownership.
On the surface that sounds good.
But since governments are never willing to do more with less, under SB 160 if you are a long time homeowner you will see your property taxes increased gradually over a five year period as your property value is moved closer to market levels.
While your property tax bill might not change that much on an annual basis, make no mistake about it – the change over a five year period will be a major hit to your budget.
Pay close attention to the situation with this bill and follow its progress closely to see whether it becomes law.
If it does, while new homebuyers may be avoiding property tax lightning, as a long time homeowner there may be a new bolt of lightning aimed directly at you!
