Fires Could Lead To Lower Property Taxes, But Not Automatically

Oct 22, 2020

The recent wildfires in Oregon could have tax implications for people who lost their homes.

Thousands of homes were lost in the blazes that swept the state in early September.

The Echo Mountain Fire destroyed roughly 300 homes in Lincoln County, mostly near the small town of Otis.
Credit Chris Lehman / KLCC

In Lincoln County, for example, some 300 homes were destroyed in the Echo Mountain Fire. County assessor Joe Davidson said a house that burned down is pretty much valued at zero dollars. But he said that doesn’t automatically reduce the property tax bill. The current year’s taxes can be pro-rated to account for fire damage, but homeowners need to apply.

“I know these people are displaced," he said. "We’re just trying to do our best to get the word out that we do need a form, and we’ll do our part in adjusting the current tax bill.”

He said the damage to the property will be reflected in next year's tax bill, regardless of whether a property owner applies for a reduction for this year's bill. Teams from the assessor's office are documenting fire damage in the county.

Davidson said taxes might not be reduced as much as a homeowner expects. There two reasons for that.

First, the assessed value of a property is generally lower than the market value of the property. That's because assessed values can only rise three percent each year (unless there are changes to the property), whereas market values can rise more quickly with the real estate market. Properties are taxed on the lower of the two figures, which is usually the assessed value. So the starting point for the reduction will typically be from the assessed value, not the market value.

The second reason why property tax reductions might be lower than expected is because the land a house sits on has its own value. Davidson said that value isn’t reduced by the loss of the dwelling.

"We can't just arbitrarily adjust land value because we think that it should be lower," he said. "Typically we have to rely on market indicators for that."

In other words, if a fire-ravaged neighborhood is seen as less attractive to potential buyers, that could eventually lower the assessed value of the land. But that could take years.

In the meantime, Davidson expects lots of questions when Lincoln County property owners receive their tax statements this month.

"We're used to handling isolated fires throughout the county each year," he said. "To have damaged property at this scale, it's just unprecedented. But we are trying to do our best."