The 'Split-Rate' Tax: Why Colorado Might Start Taxing Your Land More Than Your House

The Bottom Line

This bill gives local governments the option to split their property tax rates, charging a higher rate for raw land and a lower rate for the buildings sitting on it. The goal is to encourage developers to build more housing while penalizing speculators who sit on vacant lots. If your town opts in, your property tax bill could look very different depending on how heavily you've developed your land.

What This Bill Actually Does

Right now, Colorado property taxes are generally applied at a uniform rate to a property's total assessed value—meaning the land plus whatever is built on it. House Bill 26-1119 flips this script to tackle the state's severe housing shortage. It authorizes split-rate property taxation, allowing local governments to tax raw land at one rate, and the buildings or improvements on that land at a lower rate. The core philosophy here is simple: penalize people for sitting on vacant, unproductive dirt, and reward people who build housing or commercial spaces.

Under this bill, local taxing authorities—ranging from city councils to metropolitan districts—can choose to adopt these differing mill levies starting in the 2027 property tax year. There’s a strict mathematical rule they must follow: the tax rate on improvements must be less than or equal to the rate on the land itself. However, not every piece of land qualifies for this new math. The bill specifically forbids local governments from applying split rates to several protected categories:

• Agricultural property
• Land protected by a perpetual conservation easement
• Mining claims and oil and gas property
• Renewable energy production property
• State-assessed property

To make this work, the bill requires local governments to publicly report these differing rates on their annual tax certifications. County assessors, who already calculate land and improvement values separately on the back end for their own records, would now have to integrate these split rates into the actual tax bills. Because public school districts are completely excluded from using this specific authority, property owners in participating areas would see a blend of traditional uniform taxes (for schools) and split-rate taxes (for city or county services) on their annual statements.

What It Means for You

If your local city council or county commission decides to adopt this split-rate system, the impact on your wallet will depend entirely on how you are currently using your property. If you own a typical single-family home, a duplex, or a condo, you might actually see your overall property tax burden stabilize or even drop. Because the mill levy on improvements (your actual house) would be capped below the rate for the land, your productive use of the property is essentially rewarded. Conversely, if you are holding onto a vacant residential lot in a desirable neighborhood just waiting for the value to go up, your tax bill could spike significantly. The local government will be taxing that empty dirt at a premium rate to nudge you into either building on it or selling it to someone who will.

For renters, the long-term impact is all about supply. The stated legislative intent of this bill is to break down the financial barriers developers face when trying to build new housing, especially in areas where land costs have skyrocketed. By making the tax burden lighter on the actual construction phase and heavier on the land itself, the state is hoping to spur more infill development—think adding an accessory dwelling unit (ADU) in a backyard, or turning a vacant downtown lot into a multi-story apartment building. If this works as intended, an influx of new housing units could eventually help cool down Colorado's hyper-competitive rental market.

It is crucial to remember that this bill is entirely optional for local governments. The state isn't forcing any city or county to switch to a split-rate system overnight. Your daily life and tax bills won't change unless your specific local taxing entities vote to make the switch for the 2027 property tax year or beyond. Keep a close eye on your local city council or metro district board agendas over the next few years, as those local debates will determine if and when this complex new tax math hits your mailbox.

What It Means for Your Business

If you are in real estate development, commercial construction, or residential building, this bill could fundamentally change your financial models. By effectively creating a partial building exemption, local governments that adopt this policy will make it cheaper to construct and operate dense, high-value projects on small footprints. If you've been hesitant to pull the trigger on a mixed-use project because the newly improved property value would trigger a massive ongoing tax liability, a split-rate system significantly de-risks that investment. This is particularly relevant for urban infill projects. You’ll want to prioritize scouting land in municipalities that signal an intent to adopt these split rates, as those jurisdictions will suddenly offer a much better return on investment for high-density builds.

On the flip side, if your business model involves land banking—acquiring parcels in growing areas and holding them until developers pay a premium—this bill is a direct threat to your bottom line. In participating districts, the holding costs for vacant commercial or residential dirt will jump. For commercial landlords with existing, highly developed properties (like a dense multi-story office building), you could see a net tax benefit. However, businesses sitting on sprawling, underdeveloped parcels—like a small standalone retail shop surrounded by acres of underutilized surface parking—might find themselves paying a hefty premium for that land.

For businesses operating within special districts, the operational landscape will get complicated fast. The bill allows a massive variety of entities to adopt these split rates, including:

• Metropolitan Districts and Business Improvement Districts
• Downtown Development Authorities (DDAs)
• Urban Renewal Authorities (URAs)

These districts heavily rely on Tax Increment Financing (TIF), which diverts the new property tax revenue generated by your building improvements to pay off public infrastructure bonds. If a local government drastically lowers the tax rate on improvements, it could disrupt the revenue streams those TIF agreements depend on. Additionally, if your company manages properties across multiple Colorado counties, prepare for an administrative headache. Since this is an opt-in system, your accounting team will have to navigate a patchwork of different tax structures, with some jurisdictions using traditional flat rates and others employing varying split rates starting as early as the 2027 tax year.

Follow the Money

Implementing this optional system comes with a hefty administrative price tag. At the state level, the bill requires an estimated $584,000 from the General Fund in its first year (FY 2026-27), primarily to fund massive IT programming updates at the Department of Local Affairs and the Division of Property Taxation to accommodate the new split-rate reporting formulas. The Legislative Council Staff will also require $150,000 annually to conduct in-depth audits ensuring county assessors are valuing land consistently across the state.

The biggest financial shockwave, however, hits local governments. Every county assessor's office would be forced to overhaul their Computer Assisted Mass Appraisal (CAMA) software to handle the dual-rate calculations. The state’s fiscal note estimates this will cost smaller counties around $280,000 each, while larger counties could face software upgrade bills averaging $350,000. While the bill doesn't directly dictate whether a local government's overall tax revenue goes up or down—that depends entirely on the specific rates they choose to set—the upfront software and staffing costs to manage the transition will be a significant hurdle for any county considering the switch.

Where This Bill Stands

HB26-1119 is currently Dead. The latest official action came on 04/16/2026: House Committee on Finance Postpone Indefinitely.

That means the bill is no longer advancing this session. In practice, measures that are postponed indefinitely or otherwise declared lost generally stay dead unless they are reintroduced in a future session.