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Proposition 13: How Does Property Tax Trending Affect My Property Taxes?

Todays Date: November 18, 2018

Property tax values in California increase from 0-2% annually, this percentage trend is from on the Consumer Price Index that measures inflation. Normally, California taxpayers pay approximately 1.25% of their assessed value in actual property taxes per year. If a house was bought for $100,000, the taxable base value would be $100,000. Since you pay about 1.25% of the assessed value, your property tax bill the first year would be approximately $1,250.

California taxpayers the property tax base value is capped unless there is a re-assessable event, the only variation is the two percent trend based on Proposition 13. So the second year the increases would max out at a $2,000 increase based on the 2% limit. The assessed value increases from $100,000 to $102,000 meaning the property taxes increase from $1,250 the first year to $1,275 the second year. The 2% increase compounds over time, so the amount that it goes up also increases over time because the assessed value compounds. Some years the percentage is less than 2%, based on the Consumer Price Index.

Sometimes, when certain exemptions are applied to your assessed value, the assessed value will not trend. For example, if a residence has a Proposition 8 decline in value (temporary decline in value due to market decrease) the value will not increase. Instead the assessed value is evaluated each year by the Assessor to decide if it should be adjusted. Also, if there is a Disaster Relief exemption also called Misfortune and Calamity applied to a residence the value will not increase, instead the Assessors Office will visit the house every year to see where the property owner is with repairs and will either modify the value or leave it depending on what has been done. Additionally, most exemptions for the disabled and/or veterans dont trend either. The general rule of thumb is that your base value will increase up to 2% per year every year unless there is some exemption that would apply.

Generally homes in California increase every year and consequently property owners have an increase in property taxes every year. After 30 years your assessed value will double. A clear example of this is my parents’ home which they bought in 1979 for $80,500 and the current assessed value in 2009 for thier house based on the $80,500 30 years ago is $138,783 so in 30 years they went from paying $1,006 per year to $1,734 per year. If you begin with a property tax base of $500,000 in 30 years your assessed value will increase to $887,922 meaning you will start off paying $6,250 per year and in 30 years be paying $11,099 per year!

If you can drop your property tax base you will save thousands in the long run! If you acquired your residence for $500,000 and today your property is only worth $300,000 you will save thousands! With a $300,000 tax base you will pay $3,750 per year and in thirty years your assessed value will be approximately $532,753 so you will pay about $6,659 per year in property taxes. Don’t settle for the temporary reduction in value the Assessor is offering right now called Proposition 8 Decline in Value. So PERMANENTLY lowering your property tax base by $200,000 will save you EVERY year you own your home! The California Little Black Book shows you how!

About the Author: Valerie Faltas, Property Tax Expert has been involved in all facets of real estate for over ten years including assessments, appraisals, estates and trusts, investing and much more. She is a Certified Property Tax Appraiser, Licensed Residential Appraiser and a member of the International Association of Assessment Officers. As a real estate investor and advisor she is well versed in all aspects of real estate. To contact Valerie Faltas go to her website: www.propertytaxlittleblackbook.com.

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