Uncapping is when a property is sold or changes hands (when the original owner(s) is no longer the owner). What happens is the Assessed Value (SEV/State Equalized Value) plus land values and economic condition factors that are placed on the properties each year becomes your new Taxable Value.
Example: Assessed Value is 50,000 and Taxable Value is 30,000. When you purchase the property the Assessed and Taxable Value become $50,000 (plus land value and economic condition factors). **Your taxes for the following year will not be what they were the year you purchased them. If you bought property during the year, your taxes are based on the old owner’s values. Once the year is over your property becomes uncapped and your new values begin.
The SEV or State Equalized Value is half the true cash value of the property. This value is what is determined to be Market Value. There is no limitation on the percentage that is increased or decreased each year. Those values are determined by a 24 month sales study on what is happening in your neighborhood. Therefore, ½ of your purchase price will not become your new SEV. That process is called chasing sales and it is illegal. Your State Equalized value can also be lowered if you remove a building or increased if you add on to your property.
Taxable value is what your property taxes are based on. There is a limitation on the percentage in which the property can increase; 5% or the IRM(inflation rate multiplier) also known as the cost of living, whichever is lower (PROPOSAL A OF 1994) The Taxable value can also be increased if you add on to your property, or decreased if you removed buildings/structures from your property.
***ASSESSED VALUES CAN GO DOWN AND YOUR TAXABLE CAN GO UP, DEPENDING ON THE COST OF LIVING***