The proposed property tax rates for Covington are out, and Covingtonians can expect a lower tax rate on real estate but a higher rate for personal property, also called tangible property.
That means if the assessed value of your property only saw a modest increase this year, then you’ll pay less in taxes, according to Covington’s Budget Director Joe Ewald. At the proposed real estate rate, said Ewald, “if your assessment increased by less than 9.5%, you’ll pay less in taxes.”
The Board of Commissioners will perform a first reading of the new tax rates on Tuesday.
The proposed real estate property tax rate is $0.262 per $100 of property valuation, down from last year’s rate of $0.287 per $100 of property valuation. That’s an 8.7% rate reduction, according to Ewald. It also represents the compensating tax rate, the rate required to bring in the same amount of tax revenue as the preceding year.
The tangible, or personal, property tax rate, on the other hand, is going up from $0.375 to $0.397 per $100 of assessed property. The proposed personal property tax rate is 4% higher than the compensating rate, the maximum rate increase cities can impose without risking a recall election.
Real estate property taxes are levied against homes and commercial real estate. Tangible property, on the other hand, is taxed against equipment and other movable property, essentially anything that’s not nailed down. Tangible property taxes tend to affect businesses more than residents.
You can read more about how property taxation, including recall elections, works by reading LINK nky’s tax explainer below.
Property taxes are broken down into several categories. The first and usually largest chunk of your tax bill is real property tax, sometimes referred to as real estate property tax. This is essentially a tax on everything you own that’s nailed down. For residents, this means houses and other real estate property. For businesses, this means office buildings and other buildings and facilities used to conduct business.
Tangible personal property, on the other hand, is another form of property that isn’t real estate. Depending on where you live, residents may not be taxed on personal property at all–this will vary by jurisdiction.
Depending on where you live, other tax-adjacent fees may apply.
How do property taxes work?
Tax rates are based on the assessed values of local properties, a process carried out by the Kenton County Property Valuation Administrator.
“This was a reassessment year for the city of Covington,” said Ewald. “Unlike the last reassessment year, where assessments actually increased more than 20% this year, it only ended up being about 12.7 % overall.”
Personal property tax rates tend to fluctuate from year to year, depending on business inventories, equipment quality and other changes in market conditions.
Ewald had actually asked the commissioners for a higher real estate rate of $0.272, but Commissioner James Toebbe was the first on the board to express disfavor about that, arguing the city’s payroll tax would likely come in higher than expected, based on previous years’ trends. Comparing numbers between this year’s budget and last year’s actual collection, Toebbe pointed out that this year’s payroll tax budget was “$32,350,000. We finished last year at $34,143,331.”
Ewald said he crafted the proposal to be as conservative as possible, in case of an unexpected downturn that would endanger city revenues, such as if a large employer decided to institute massive layoffs or leave the city altogether.
“The number is conservative, no doubt about that,” Ewald said. “But it’s conservative based on normal carefulness as a budget director.”
Still, the other commissioners favored setting the new rate at $0.262, and the vote to adopt the budget director’s recommendation was unanimous.
“I compliment Commissioner Toebbe for being diligent on the numbers,” said Mayor Ron Washington.
The board will perform a first reading of the new tax ordinance text this week on Tuesday, Sept. 8. They’ll cast a final vote on the tax rate two weeks later on Sept. 22.
