Understanding Your Tax Bill
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, which is up to 3%[2].
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.
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, 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. This is also reported only indirectly in the Board of Assessors Tax Classification Packet - where the debt exclusion increment is reported relative to the previous year levy limit plus the previous year debt exclusion increment.
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 Board of Assessors Tax Classification Packet, 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: abatements, exemptions, deferrals etc.
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[3]. The real estate tax deduction is not allowed when calculating the AMT[4].
References
- Residential Property Tax and Property Assessment Explainer, by Vicki Blier (TMMA)
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[5], unless the vehicle is exempted from excise tax [6].
Excise taxes are in lieu of local property tax. The excise tax rate is set by the state[7]. Valuation is computed by the Registry of Motor Vehicles[8], but may be abated by the Lexington Board of Assessors[8]. 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[9]. The excise tax deduction is not allowed when calculating the AMT[4].
References
- FAQ for motor vehicle excise
- How the motor vehicle excise tax is computed
- Motor Vehicle & Trailer Excise Tax Manual
Notes
- ↑ Plus CPA surcharge, and adjusted by exemptions and deferrals.
- ↑ 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.
- ↑ IRS Publication 530 (2012). See section on Real Estate Taxes.
- ↑ 4.0 4.1 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."
- ↑ Motor Vehicle & Trailer Excise Tax Manual, Place of Assessment
- ↑ Motor Vehicle & Trailer Excise Tax Manual, Exemptions.
- ↑ Motor Vehicle & Trailer Excise Tax Manual, Calculation of the Excise Amount.
- ↑ 8.0 8.1 Motor Vehicle & Trailer Excise Tax Manual, Role of the Registry of Motor Vehicles in administration of the motor vehicle excise.
- ↑ Boston.com: Is vehicle excise tax a proper write-off for itemized tax deduction? (last accessed Dec 8, 2013)