Increasing Car Values Prompt Fairfax County To Mull Mitigation Option

FAIRFAX COUNTY, VA — Amid increasing values of new and used cars, a Fairfax County Board of Supervisors committee was briefed Tuesday on possible options for mitigating the personal property tax impact on Fairfax County car owners.

In Fairfax County, cars are taxed at $4.57 per $100 of assessed value. Normally car values depreciate each year, which means the personal property tax — also known as the car tax — bill would go down. But due to global shortages of microchips and other key auto parts and high demand, prices of new and used cars have gone up.

According to a county staff presentation to the board's budget policy committee, nearly 90 percent of Fairfax County car owners will have a "substantial increase" in their car's assessed value this year. The average personal property tax bill for vehicles would increase by $186, county staff estimated. Like other localities in Virginia, Fairfax County assesses car values for the personal property tax using JD Power pricing guide as of Jan. 1 of each year.

The impact of increasing car values is more significant than the previous year. In the most recent personal property tax cycle, an estimated 12 percent of Fairfax County car owners had higher tax bills, Jay Doshi, director of the Department of Tax Administration, told the board.

Staff's recommended option for addressing increasing car values is using an assessment ratio. That would mean using 85 percent of JD Power's values rather than 100 percent.

"This would be something that we would recommend applying only for this tax year," Christina Jackson, chief financial officer for Fairfax County, told the board committee. "So it wouldn't be applicable to future tax years, unless vehicle values were elevated and next year and then the board can reevaluate next year."

Jackson said Loudoun County is pursuing this assessment ratio option, and other local jurisdictions are considering it as well.

Staff presented an example vehicle to show the impact of an 85 percent assessment ratio. For example, a car with an assessed value of $11,778 in fiscal year 2022 would be assessed at $15,663 in fiscal year 2023 with a 100 percent assessment ratio. With an 85 percent assessment ratio, that assessed value would be $13,314.

When applying the county's personal property tax rate, the tax bill in fiscal year 2022 is $538, or $229 after applying state personal property tax relief. With an 85 percent ratio, the car tax bill in fiscal year 2023 would be $608, or $307 with personal property tax relief. With a 100 percent ratio, the bill would be $716, or $415 with personal property tax relief.

Virginia's Personal Property Relief Act 1998 subsidizes a portion of the tax on the first $20,000 of the car value. Jackson noted the state relief funds have been frozen for over a decade, which diminishes the impact of relief on car owners' tax bill.

Board of Supervisors Chairman Jeff McKay said a key priority should be writing to Gov. Glenn Youngkin about car tax relief for residents.

If the board chooses to move forward with the 85 percent ratio, it would be included as part of the county budget markup on April 26 and the budget adoption on May 10.

Other options not recommended by county staff would be reducing the personal property tax rate and using a different assessment valuation method. The county's tax rate has been $4.57 per $100 of assessed value since 1988, according to Jackson.

"Certainly our concern, in part of changing the rate, is that we view this as a short-term issue in terms of the vehicle values. We're hoping that there's going to be a stabilization, perhaps not next year but perhaps the year following [year]. We also recognize that that tax rate applies not only to vehicles. It also applies to business personal property. So to the extent that we change that tax rate, we would also be losing revenue on the business personal property side as well."

On considering a different assessment valuation method, Jackson said the county doesn't have the data on the impact of moving from the mid-range trade-in value to a lower-range value. Jackson said that data can be pulled together so that option could be considered for future years. According to Jackson, Fairfax County has been using the mid-range value for at least 30 years.

Personal property tax bills for vehicles are mailed to car owners in July and are due on Oct. 5.