NASHUA, NH – With the city tax rate being released sometime after Thanksgiving, city treasurer and tax collector Dawn Enwright gave a timely presentation on how the tax rate is set during a special Board of Aldermen meeting on Nov. 26.
Here’s what you should know before the tax rate is announced.
The tax rate is set by the Department of Revenue Administration (DRA) and is calculated by the commissioner.
The tax year goes from April 1 to March 31 of the following year.
Components of tax bill
In each municipality, there are at least four portions to each tax bill
- Local municipal tax rate
- County tax rate (each municipality pays a portion of the county budget)
- Local school rate
- Statewide education tax
DRA review process
For the tax rate to be calculated, each municipality sends the following financial reports to the DRA.
- Current year adopted budget
- Financial reporting of prior year end
- Adopted budget appropriations
- Property assessments
- Adopted budget revenues
- School financial reporting of the prior year end
- City unassigned fund balance amount to be used as offsetting revenue from “surplus”
- Establish overlay – amount for future liabilities for abatements granted
The reports are checked by the commissioner for compliance with state statutes (RSA 21-J:34), ensuring that…
- All appropriations are made in a manner with consistent with procedural requirements
- No appropriations made that are prohibited
- All revenues are estimated accurately and in a manner that is not prohibited
- All calculations are correct
What can change the tax rate?
There are three contributing factors that could change the tax rate from year to year.
- Increase or decrease to appropriations and/or revenues
- Credits and exemptions
- For example, if the veterans credit goes up, the amount billed will be less and the reduction of veteran’s billings will need to be made up through other property taxes
- Or, if the elderly exemption limit is changed and more people qualify, the amount billed will be less for the qualifying tax payers and the reduction in billing will need to be made with up through other property taxes
- Local assessed property valuations
How the tax rate is calculated
Simple tax rate formula
To find out how much tax money needs to be raised, the total revenue is subtracted by the total appropriations. The difference needs to be raised through taxes.
That number is then divided by the total local assessed property values to determine the tax rate per $1,000 of value.
Your individual tax liability – the amount you pay in taxes that year – is your property assessment divided by one thousand, multiplied by the tax rate.
For example, if your property is valued at $300,000 and the tax rate is 15.31 per $1,000 value
your tax liability is $4,593.75 ($300 x 15.31)
Scenarios
