Marblehead 2020 Tax Rate drops sharply

This is a good news, bad news story.

The good news: the tax rate for Fiscal Year 2020 (July 1, 2019 to June 30, 2020) will drop from \$10.74 to \$10.39.

The bad news: taxes paid are going up. The median Single Family Home assessed value increased 7% from \$630,000 to \$674,000, resulting in a 3.5% increase in the median tax bill from \$6,766 to \$7,003.

Remember that assessments for 2020 are based upon prices achieved in 2018.

Prop 2 1/2 refers to the entire tax bill in dollars. Take last year’s taxes, add 2 1/2% plus new growth, add in the cost of debt exclusions, and that produces the dollar amount for the following year.

Now take that amount and divide by the assessed value to get the tax rate. That is the rough formula. In towns like Marblehead, there is one rate for all types of property. Other towns choose to tax commercial property at a higher rate.

But sticking to Marblehead, getting the dollar amount to be raised each year is fairly easy. The main variable is the assessed value. In a year when the assessed value goes up sharply, as in 2020 when the median assessed value will increase by 7%, the tax rate will go down, because one is dividing the dollar amount raised by a larger figure.

This simplistic table illustrates how the calculation is made:

The first column represents Taxes of \$100,000 to be achieved from an assessed value of \$10,000 (I am ignoring mill rates to make the example simpler). \$100,000 divided by \$10,000 produces a tax rate of \$10.00.
The second column shows a 2.5% increase in taxes to \$102,5000, and an increase in assessed value to \$10,500. Divide one by the other and the tax rate drops to \$9.76 – but the dollar amount raised goes up. This is the scenario in Marblehead for 2020.
The third column shows what happens if assessed values go down. The amount to be raised it still \$102,500, but dividing this by the reduced assessed value of \$9,500 produces a tax rate of \$10.79.

The bottom line is that taxes paid nearly always go up. Not universally: in any year some will go up, some down and some stay the same.

But at least now you know that in all probability, when you get that tax bill just before year end, although the tax rate will be going down, your tax bill will be going up.

I shall publish a more detailed explanation of the 2020 Marblehead tax rate in due course, along with tax rates for all 34 cities and towns in Essex County as they are announced in coming weeks. Click Property Taxes to go to the section of the blog with information about property tax rates throughout Essex County.

Andrew Oliver
Market Analyst | Team Harborside | teamharborside.com
REALTOR®

Sagan Harborside Sotheby’s International Realty
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