Every property tax base in California trends from 0-2% every year, this percentage trend is based on the Consumer Price Index that gauges inflation. Generally, most California homeowners pay about 1.25% of their assessed value in actual property taxes annually. So if you purchased your house for $100,000, and it was market value, your base value would be $100,000. Because you would pay 1.25% of the assessed value, your tax bill the first year would be about $1,250. Your property tax bill for the first year would be pro-rated for the part of the year you owned the residence and/or you would get credit in escrow for the amount the prior owner owed.
In California that base value stays the same unless there is a re-assessable event, the only variation is that it trends no more than two percent every year. So the second year you own the property the trend would max out at a $2,000 increase based on the 2% limit. Your assessed value would increase from $100,000 to $102,000 which means your property taxes would increase from $1,250 the first year to $1,275 the second year. The 2% compounds over time, so the amount that it increases also increases over time because the value does compound. There are years where the percentage is less than 2%, again that number is based on the Consumer Price Index.
At times, when certain exemptions apply to your assessed value, it will not increase annually. If a home has a Proposition 8 decline in value (temporary decline in value because market decline) the value will not trend. The assessed value will be reviewed annually by the Office of the Assessor to decide if it should be modified. Similarly, if there is a Disaster Relief exemption also called Misfortune and Calamity applied to a residence the assessed value will not trend, instead the Office of the Assessor will visit the property every year to see the house repairs and will either modify the value or leave it depending on what has been constructed. In addition, most exemptions for the disabled and/or veterans do not increase either. Generally, your base value will increase up to 2% per year every year unless an exemption that applies.
Usually speaking though most houses in California will trend annually and as a result of this each property owner will have a slight trend in property taxes every year. What happens over a period of about thirty years is your assessed value will more than double. For example, my parents acquired their property in 1979 for $80,500 and the current assessed value for that property based on the $80,500 thirty years ago is $138,783 so in thirty years they went from paying $1,006 per year to $1,734 per year. If you start out with a property tax base of $500,000 in thirty years your assessed value will be $887,922 which means you will start off paying $6,250 per year and in thirty years be paying $11,099 per year!
If you understand how lower that property tax base you will save thousands in the long run! If you acquired your home for $500,000 and today your residence is only worth $300,000 you will save thousands! With a $300,000 tax base you will pay $3,750 per year and in 30 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 residence! 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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