Last Updated April 19, 2023
Considering relocating to Oregon? If you are, the cost of living here is probably a big consideration. Property taxes are definitely one part of that puzzle. So let’s cover all that you need to know about property tax rates in Oregon.
You’ve probably heard already that Oregon is one of only five states without a sales tax. That’s a definite plus, but it’s balanced by the fact that Oregon has the fourth-highest income tax rate in the country.
While social security benefits are exempt from state income taxes, withdrawals from retirement accounts are taxable in Oregon. So, retirees need to keep that in mind when calculating the cost of living here.
The other tax that you need to know about, of course, is property taxes. Read on and we’ll go through all the ins and outs of how property taxes are calculated in Oregon.
What Are Property Taxes?
Before we go into the different factors that impact property tax rates in Oregon, it helps to understand what property taxes actually pay for.
Property taxes in Oregon and elsewhere actually consist of a bundle of individual municipal and county-level taxes. Those include school district taxes, local government taxes, and voter-approved bond levies.
- What Are Property Taxes?
- What is the Formula for Determining the Tax Rate on a Property?
- How is Property Value Assessed in Oregon?
- Why are My Taxes Higher than My Neighbors, and are Property Taxes on New Construction Higher?
- In Conclusion
The amount you’ll have to pay for each of these taxes is calculated based on a percentage of your property’s taxable value.
In Oregon, “Assessed Value” is synonymous with taxable value. Your home’s Assessed Value is different from its actual market value. We’ll cover that distinction later.
What goes into your property tax bill can vary wildly between different municipalities and counties.
So, we’ll spend most of our time explaining what goes into determining Assessed Value, since it’s the single biggest factor in determining how much you’ll have to fork over in property taxes.
Oregon Property Tax
In terms of average property tax rates, Oregon sits somewhere in the middle of the pack. Its property tax rate is the 23rd-highest in the country, averaging 0.97 percent.
In other words, a typical Oregon homeowner should expect to pay about 1% of their home’s total value per year in property taxes. The annual tax bill for a $400,000 home should be around $4,000 on average.
But that’s only a general rule of thumb. In reality, tax rates on individual properties can vary wildly.
It can all seem fairly random, but actually, there’s a method to the madness.
How do Oregon Property Taxes Work?
If you want to understand how property tax rates are calculated in Oregon, the place to start is Ballot Measure 50, which was implemented into law in 1997.
Prior to 1997, Oregon’s property taxes were based on a property’s “Real Market Value.” That’s the amount a property should theoretically sell for on the open market. Measure 50 established new criteria for determining property taxes, “Assessed Value.”
So, what is Assessed Value? It’s a bit convoluted, but let’s go through it step-by-step.
What is the Formula for Determining the Tax Rate on a Property?
Initially, Assessed Value was calculated by taking a property’s real market value as of 1995 and subtracting 10%. That figure would then increase at a fixed 3% per year.
So a home with a Real Market Value of $100,000 in 1995 would have an Assessed Value of $95,481 in 1997. Adding 3% per year, in 2021, the same property’s Assessed Value would be $199,916.
Let’s say the county calculates that home’s Real Market Value at $300,000. Because the Assessed Value is lower, the county will disregard that number and instead calculate property taxes based on the Assessed Value of $199,916.
But, if the Real Market Value of that home were only $150,000, the county would use that number instead of the Assessed Value.
Following the 2008 financial crisis, many properties lost significant value, causing RMV to sometimes drop below Assessed Value.
Overall, though, Oregon’s real estate market has appreciated significantly more than 3% per year since 1995.
As a result, tax bills haven’t gone up as much as property values. Oregon homeowners can thank Measure 50 for that.
How Property Tax Rates are Determined for New Construction in Oregon
What about homes constructed more recently than 1995? Taxing new construction based on its market value would be unfair when older homes are essentially receiving a discount.
So, assessors simply calculate the average gap between assessed and Real Market Value throughout the county, then apply that same discount to new construction.
Let’s say a new construction home would theoretically sell for $500,000, and homes in that county are assessed at an average of 60% of their Real Market Value.
The Assessed Value for the new construction home would therefore be $300,000. Don’t worry if all of this is a bit confusing.
For now, the most important takeaway is that taxable value isn’t recalculated when a home sells. Instead, Assessed Value rises at a fixed percentage every year. That’s in contrast to some other states.
How is Property Value Assessed in Oregon?
We’ve mentioned “Real Market Value,” but let’s clarify exactly what that means.
Not to brag or anything, but the tools that county assessors use to determine property value aren’t as sophisticated (or accurate) as those used by Realtors or appraisers.
That’s understandable given the need to reappraise every single property every year. But let’s look into what actually goes into property assessment.
It shouldn’t come as a surprise that, by and large, the process for property assessment is automated.
Assessors (and their computer systems) keep track of certain basic information about homes, though the specifics vary from county to county.
Assessors will perform a limited exterior inspection every few years, but there’s only so much they can take into account. There are certain situations, however, which will trigger an interior inspection and reassessment.
Basically, if you’re doing any kind of work that requires building permits, reassessment is on the table. That will result in a new (and higher) Real Market Value.
The real kicker, though, is that assessors will recalculate your property’s Assessed Value based on the average countywide gap. That can mean a drastically higher property tax bill, even if you’ve performed limited improvements.
For example, you’ll need to pull permits to do the plumbing and electrical work necessary to add a bathroom, and that can trigger a reassessment. You probably won’t need any permits, however, to remodel your kitchen.
It can be tempting to do work under the table. Be aware, though, that unpermitted work can really hurt your home’s resale value.
Why are My Taxes Higher than My Neighbors, and are Property Taxes on New Construction Higher?
Yes, it’s entirely possible that you’ll have a higher (or lower) tax bill than a neighbor with a similar home. There are many possible explanations.
Home improvements in one or the other property could have triggered a reassessment, resulting in a higher property tax bill. We describe that process in the section above.
Following the financial crisis of 2008, homeowners had the opportunity to petition the county government for a reassessment. If your neighbor made a successful petition, their home’s Assessed Value could have dropped significantly.
Even when the market recovered, properties were capped at a 3% annual increase, so the difference could be big.
It’s also worth talking about new construction.
We talked above about how assessors apply a “discount” to new construction when calculating Assessed Value. Theoretically, that should level the playing field.
But assessors often give more value to new construction than the market does. In Oregon’s urban areas, new homes are often located in less desirable locations on the outskirts of town. They’re on smaller lots, with less developed landscaping.
The result is that property taxes on new construction homes will likely be higher than they would be for a comparably-priced older home.
How Property Tax Rates Vary Throughout Oregon
Properties that sit within city limits will have more taxes – and a higher tax bill – than rural properties. Bigger cities tend to levy more taxes than smaller towns, but there are some nuances.
Just looking at property tax rates will give you one idea about what places in Oregon are the most expensive to live in.
But, as we mentioned earlier, there’s usually a big gap between taxable value and actual market value. That gap is bigger in some counties than others.
Let’s look at the figures for a number of different Oregon counties.
Unsurprisingly, Portland’s Multnomah County has the highest property tax rate in the state, at an average of $20.12 per $1,000 of Assessed Value as of 2018.
But Multnomah County also has one of the state’s biggest gaps between Assessed Value and Real Market Value. That’s because property values have appreciated faster in Portland than elsewhere in Oregon.
As a result, Multnomah County’s tax per $1,000 of Real Market Value is actually one of the lower in the state, at just $9.87.
It’s good to have a silver lining. You might have to pay significantly more to live in Portland than you would in most other places in Oregon. But, your property tax bill on, say, a $600,000 home will be less than it would be for a $600,000 home in many other places.
Clackamas County, which includes the suburbs south and to the east of Portland, is home to several of Oregon’s most expensive real estate markets. Lake Oswego takes the cake as the state’s most pricey, and West Linn isn’t far behind.
The average tax rate is $16.00 per $1,000 of Assessed Value, but homeowners will need to pay, on average, $10.60 per $1,000 of Real Market Value.
Washington County includes the suburbs south and to the west of Portland. Sherwood is number 4 on the list of Oregon’s most expensive markets.
The tax rate is on the somewhat higher side here, at an average of $17.07 per $1,000 of Assessed Value. The average rate of $10.88 per $1,000 of Real Market Value puts Washington County in the middle of the pack.
Deschutes County, the home of Bend and Redmond, is another part of Oregon which has seen exceptional appreciation over the past chunk of time. That’s led to an average property tax of just $8.93 per $1,000 of Real Market Value.
Again, that’s as of 2018 – in the past 3 years, Bend and Redmond’s markets have appreciated significantly more. That means Deschutes County homeowners are getting a significant discount on their property tax bills.
Homeowners in Lane County, which includes Eugene and Springfield, pay somewhat more, with taxes averaging $11.14 per $1,000 of Real Market Value. In terms of tax rates, the average is $15.42 per $1,000 of Assessed Value.
Eugene presents an interesting case study in terms of how property tax rates can vary wildly in similar locations.
Its northwest quadrant (along River Road) consists of a patchwork of incorporated and unincorporated properties. Property taxes on the latter tend to run only about 60% of comparable incorporated properties.
We’ve really gone through the ins and outs of property taxes in Oregon, and it might seem like a lot to try keep in your head.
Don’t worry too much, though. The most important takeaway is simply that it’s important to look at property taxes on a property-by-property basis.
Don’t sign on the dotted line until you’ve clarified what you’re on the hook for. Also, make sure your lender is factoring property taxes into their calculations.
Another key takeaway: as Oregon’s markets continue to appreciate, property tax bills will get lower and lower relative to market value. That’s assuming new legislation isn’t passed, of course. It’s a pretty nice perk if you’re budgeting for the future.
With all of that said, property taxes are just one consideration if you’re looking to buy a home in Oregon. We’re relocation specialists serving the Bend/Redmond and Eugene/Springfield areas, and we also have partners in other markets who offer the same level of exceptional service.
Whatever your concerns are, we’ve got you covered. Keep browsing our site or use the button all the way to the right to contact us. Thanks for reading.