Understanding Your Tax Bill

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Lexington residents get real estate tax bills four times a year, and excise tax bills for other property (automobiles, trailers, etc).

The Real Estate Tax Bill

Residential real estate tax bills are mailed quarterly. Residences are assessed at their fair marker value on Jan 1st, the fiscal year begins July 1st, and the tax rate is set by the Board of Selectmen in December of the same year.

  • The first two real estate tax bills mailed in July and Oct represent preliminary estimates (since the tax rate is not known until December).
  • The last two tax bills, mailed in Jan and April, are different in that they:
    • List the assessed value and the tax rate at the top left
    • Are computed so the total of the four tax bills equals the assessed value times the tax rate[1].

The tax bill includes a Community Preservation Act surcharge, calculated as 3% of the parcel's net tax, which is the fiscal year residential tax rate multiplied by a parcel's assessed property value minus $100,000[2][3].

Factors causing increase or decrease in yearly tax bill

Residential taxes vary each year due to several factors, some common to all Lexington residences, others specific to particular residences.

General Factors

Factors general to all residences are:

  • The levy increase within the Prop. 1 1/2 levy limit, typically 2.5% each year, unless voters pass a Prop. 2 1/2 override. This is reported only indirectly in the Board of Assessors Tax Classification Packet[4], released in December - where the levy limit is reported inclusive of exempted debt.
  • The Prop. 2 1/2 debt exclusion increment, which usually is greater than zero even on years when no debt exclusion vote was passed. See the Tax Rate Estimate section in the Brown Book[5]. This is also reported indirectly in the Tax Classification Packet[4] - where the debt exclusion increment is reported relative to the previous year levy limit plus the previous year debt exclusion increment.
  • A change in the CIP factor, which is each December chosen by the Selectmen. The impact of the CIP factor on the tax rate is described in the Tax Classification Packet[4].
  • A change in the aggregate residential vs. commercial, industrial and property assessed value, reported in the Tax Classification Packet[4].

Specific Factors

Factors specific to particular residences are:

  • New construction, addition or renovation
  • Change in market value of the residence
    • In both cases the increase in tax is not reported directly on the tax bill, and can only be roughly inferred by the tax payer based on available data. The increase in assessment due to new construction is not reported separately on the tax bill from the increase due to change in market value.
    • For a first level estimate of the tax increase due to new construction and to change in market value, multiply the tax rate by the increment in the assessed value. The tax rate and the assessed value are reported in the January tax bill for the year following the assessment. The assessed value may also be retrieved in the Assessors Online Database.
    • For a more precise estimate, we need to take into account the fact that some portion of the assessment increase is uniform to all Lexington residences, and that does not contribute to a tax increase. The assessment totals for all Lexington residences is reported in the Tax Classification Packet[4], released in December. If the rate of increase in your assessment is same as that of the aggregate for all Lexington residences, you do not have a tax increase due to new construction or change in market value. If the rates are different, multiply your previous year assessment with the rate of increase for all Lexington residences: this represents what your assessment would have been had there been no new construction, and had your market value changed at the same rate with the rest of Lexington. The excess of your actual assessment over that, times the tax rate, approximates your tax increase due to new construction and to change in market value.
  • Loss of residence due to fire or other calamity
  • Other factors are: abatements, exemptions, deferrals, liens[2].

Federal Tax Deduction of the Real Estate Tax

Real estate taxes, including the CPA surcharge, are deductible on the federal income tax, provided deductions are itemized[6]. The real estate tax deduction is not allowed when calculating the AMT[7].

References

The Excise Tax Bill

Excise tax bills are mailed once a year, in Spring. A separate tax stub is mailed by the Lexington Collector of Taxes for each motor vehicle customarily kept in Lexington[9], unless the vehicle is exempted from excise tax [10].

Excise taxes are in lieu of local property tax. The excise tax rate is set by the state[11]. Valuation is computed by the Registry of Motor Vehicles[12], but may be abated by the Lexington Board of Assessors[12]. Payment is made to the Town of Lexington.

Federal Tax Deduction of the Excise Tax

The excise tax is deductible on the federal income tax, provided deductions are itemized[13]. The excise tax deduction is not allowed when calculating the AMT[7].

References

Notes

  1. Plus CPA surcharge, and adjusted by exemptions and deferrals.
  2. 2.0 2.1 Lexington Tax Collector/Treasurer web site.
  3. See the Community Preservation Committee homepage (last accessed Dec 7, 2013). Lexington has adopted the Community Preservation Act (CPA) on March 6, 2006. The Commonwealth matches a portion of the CPA surcharge, but the amount changes each year.
  4. 4.0 4.1 4.2 4.3 4.4 4.5 The most recent Tax Classification Packet is found on the Board of Assessors web page. Tax Classification Packets for previous years are stored in the Lexington Laserfiche Records Portal.
  5. The Brown Book is the Recommended Budget and Financing Plan presented annually to Town Meeting.
  6. IRS Publication 530 (2012). See section on Real Estate Taxes.
  7. 7.0 7.1 Alternative Minimum Tax: Common Questions, TurboTax Instructions (last accessed Dec 8, 2013): "In calculating the AMT, you cannot take itemized deductions for state and local income tax, real estate taxes and personal property taxes, even though these are deductible on your regular return."
  8. The Lexington Budget Brown Book is found on the Lexington Budget web site.
  9. Motor Vehicle & Trailer Excise Tax Manual, Place of Assessment.
  10. Motor Vehicle & Trailer Excise Tax Manual, Exemptions.
  11. Motor Vehicle & Trailer Excise Tax Manual, Calculation of the Excise Amount.
  12. 12.0 12.1 Motor Vehicle & Trailer Excise Tax Manual, Role of the Registry of Motor Vehicles in administration of the motor vehicle excise.
  13. Boston.com: Is vehicle excise tax a proper write-off for itemized tax deduction? (last accessed Dec 8, 2013)