Property Taxes: Interest Example

Posted by Oregon Real Estate

March 17, 2008

The 6 percent interest is simple, meaning that the interest computes yearly against the deferred tax amounts. Deferral accounts do not accrue compound interest, which means interest is computed on previous interest in addition to the deferred tax amounts.

For example, if your property taxes were $1,000, the interest for one year would be $60 (0.06 × $1,000 = $60). Interest continues to accrue each year on the deferred tax amounts.

The department calculates interest annually after paying the deferred property taxes to the county (usually November 15).

The table below shows an example of five years of deferred property taxes and the simple interest that accrues during that time.

Property Tax Year	Property Tax Paid	Deferred Tax Running Balance	Lien Fees	6% Simple Interest
2007–2008	$1,000.00	$1,000.00	$40.00	$0.00
2008–2009	$1,000.00	$2,000.00 ($1,000 + $1,000)	0.00	$60.00 (.06 × $1,000)
2009–2010	$1,000.00	$3,000.00 ($2,000 + $1,000)	0.00	$120.00 (.06 × $2,000)
2010–2011	$1,000.00	$4,000.00 ($3,000 + $1,000)	0.00	$180.00 (.06 × $3,000)
2011–2012	$1,000.00	$5,000.00 ($4,000 + $1,000)	0.00	$240.00 (.06 × $4,000)
Five Year Total	$5,000.00	$5,000.00 (5 years × $1,000)	$40.00	$600.00 ($60+$120+$180+$240)
*Total amount owed after five years in the program = $5,640* ($5,000 tax + $40 lien fees + $600 interest)