One-Time Car Tax Relief Possible In Alexandria As Car Values Rise

ALEXANDRIA, VA — As many car owners see their car values increase, one-time car tax relief is proposed as part of the budget in Alexandria.

In Northern Virginia localities like Alexandria, car owners pay a personal property tax each year. The car tax bill is based on a rate of $5.33 per $100 of assessed value, and state personal property tax relief funds reduce tax bills on a tiered system.

Typically, car values depreciate every year, which would mean a lower personal property tax bill each year a resident has a car. But as shortages of chips and other crucial car parts put a strain on supply, new and used car prices have gone up.

In Alexandria, car values will go up by an average 26 percent for approximately 87 percent of car owners in fiscal year 2023, according to a budget memo from City Manager James Parajon. Those increased values would create an estimated $20.96 million surplus above the city's proposed budget.

If City Council wants to address the impact of car value increases, Parajon proposed using an assessment ratio of 77 percent rather than 100 percent of fair market value for vehicles. City staff estimated a 75 percent assessment ratio would entirely eliminate the surplus from increased car values.

The city manager's proposal also calls for full personal property tax relief for cars valued up to $5,000. The current structure allows full relief for cars valued up to $1,000.

"This proposal provides all vehicle owners with tax relief, while reserving the greatest relief to vehicles with the lowest valuations," said Mayor Justin Wilson in his April newsletter.

The proposals would be considered as one-time changes, as the car market trends could get back to normal before the next personal property tax cycle. The personal property tax bills are due every year in early October.

Parajon noted that the car value increases vary widely, so increases would still be possible for some car owners even with a lower assessment ratio.

Other localities, including neighboring Fairfax County, are considering assessing values at less than 100 percent as well. Loudoun County has opted to use an 80 percent assessment ratio.

Alexandria City Council's budget process is underway with City Council work sessions on specific areas of the budget continuing. The tax rate public hearing is scheduled for April 23, add/delete sessions are planned April 26 and May 2, and budget adoption is scheduled for May 4.