Kentuckians could see property taxes on their cars and trucks leap this year when renewing their vehicle registrations.
Like with many rising prices these days, COVID is to blame. Supply shortages caused by the pandemic have made new vehicles scarce, pushing buyers to previously owned options, which in turn has increased used car values.
In Kentucky, where property tax is assessed each year on the value of motor vehicles, this spells a likely uptick in what people will owe.
For instance, Wayne County resident Randy Bauer was told by local officials that his 2019 Toyota 4Runner, which he bought in late 2018 for about $38,000, has a 2022 valuation of around $42,000.
“I’ve never had vehicles appreciate, especially when they appreciate over what you’ve paid for them brand new,” Bauer told Reader’s Watchdog, adding he’ll owe just under $500 in taxes.
Car values, overall, are jumping about 40% this year compared to last year, according to a letter sent by the Kentucky Department of Revenue to county officials.
The state updates these trade-in values yearly through its vendor, market research firm J.D. Power.
In the letter, the revenue department cites well-documented recent trends in the automobile industry, including new vehicle production constraints — due to computer chip shortages, for one — increased new vehicle prices and limited used car supply, as factors contributing to the jump in used car prices.
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Bauer, who moved to Kentucky last year, said it seemed unfair to him to be taxed on an inflated value of his vehicle.
“They ought to be able to leave it the way it is and not raise it,” Bauer said.
Kentucky legislature eyes car taxes
In response to the likely tax increase, as of Jan. 12, Kentucky legislators had filed at least four bills addressing vehicle property taxes.
House Bill 6 would require the state to use the “average” trade-in value instead of the “clean” trade-in value when assessing a vehicle’s valuation, thereby lowering the taxable amount. It also would allow those who already paid their 2022 vehicle property tax using the current method to seek a refund.
House Bill 261 and Senate Bill 75 propose using prior-year values when assessing values in 2022 and 2023.
“We have people who are dealing with a higher cost of living because of all the impacts of the coronavirus,” Sen. Jimmy Higdon, R-Lebanon, said in a news release about his bill, SB 75. “They don’t deserve to have to pay more on this tax because of a situation out of their control.”
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HB 261 further proposes limiting future taxes, starting in 2024, by only taking into account up to a 6% rise in assessed value for taxation purposes, even if that percentage is actually higher.
Similarly, Senate Bill 70 would limit taxes on appreciating vehicles by only taking into account up to a 5% rise in assessed value for taxation purposes.
Auto values can be appealed to the PVA
Colleen Younger, Jefferson County’s property valuation administrator, said she didn’t have data on how much more the average vehicle owner stood to pay, but she offered an example of one of the most in-demand vehicles.
In 2020, a 2019 Toyota Corolla was valued at $13,450. Last year, it dropped to $12,900 but this year skyrocketed 48% to $19,050.
Based on a Jefferson County average of $13.50 in taxes per $1,000 of value, that means the tax on the Corolla last year would have been $174 compared to $257 in 2022.
Younger said she welcomes legislative action to help taxpayers, as under state law, motor vehicles must be assessed and taxed yearly.
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“I think any time you have an erratic market, whether in motor vehicle or real property, there should be some type of circuit breaker solution to dealing with the erratic market and how it stands to hurt taxpayers,” she said.
State law allows for appeals to the PVA, within 60 days of receiving the notice of renewal. Such notices are typically sent the month before renewal is due, which is the owner’s birth month, according to the Department of Revenue.
Younger encouraged vehicle owners to appeal if they have vehicle damage that would lessen its value or if they drive more than 10,000 miles a year, as standard valuations are based off that marker.
“But it’s up to the automobile owner to substantiate any kind of high mileage, damage or mechanical defect,” she said.
Her office is readying a campaign to alert vehicle owners that they can appeal their valuation. Individuals can appeal by bringing supporting documentation to their local PVA office. Younger said there are plans to roll out a service for Jefferson County citizens to appeal online in the coming weeks.
Jefferson County residents can contact the PVA office at 502-574-6450. A list of PVA offices statewide can be found at jeffersonpva.ky.gov/community-links/kentucky-pva-offices/.
Bauer said he was pleased to hear vehicle valuations are able to be appealed and heartened that state legislators may address the issue, though he plans on paying the tax as billed.
Matthew Glowicki’s Reader’s Watchdog column helps readers get answers and holds public officials, businesses and individuals to account. Contact him at [email protected], 502-582-4000 or on Twitter @mattglo.