Property Taxes (San Diego, San Francisco: rent, homes, buy)

[RosieSD]

As Electrician4you notes, another factor that can make a difference between cities are voter-approved bonds and special assessments. The cost of local school bond measures, for example, are passed on to taxpayers in the district.

I am pretty sure that voters in the Carlsbad School District approved several large school bonds in the past decade, which could account for some of the difference between Carlsbad and Oceanside. In addition to school bonds, some areas and cities have other special assessments for things like fire protection.

Local school bonds and other local voter-approved assessments are separate from and in addition to state property taxes and Mello Roos, which is why everyone in California technically doesn't pay the exact same property tax rate.

[NewbieHere]

Some Mello Roos go away after 20-30 years. Some don't. Some may lasts 60 years. Do your own due diligence before you buy anything.

[agusia25]

Thank you very much for this information. It makes more sense now. I pay about 10% of estimated home value on our taxes every year. It seems that if taxes are based on purchase price rather than estimated value then it's better to buy a cheaper fixer upper and invest in a remodel. I really want to keep property taxes as low as possible.

[jnojr]

Originally Posted by agusia25

Thank you very much for this information. It makes more sense now. I pay about 10% of estimated home value on our taxes every year. It seems that if taxes are based on purchase price rather than estimated value then it's better to buy a cheaper fixer upper and invest in a remodel. I really want to keep property taxes as low as possible.

I'm pretty sure if you take out any permits, you can trigger an appraisal. CA and San Diego County want their pound of flesh.

[Cardiff Kook]

Originally Posted by jnojr

I'm pretty sure if you take out any permits, you can trigger an appraisal. CA and San Diego County want their pound of flesh.

I've had appraisals for my refinances and they came in well above my purchase price but didn't affect my property taxes. Does getting a permit affect how much property tax you pay?

[jnojr]

Originally Posted by Cardiff Kook

I've had appraisals for my refinances and they came in well above my purchase price but didn't affect my property taxes. Does getting a permit affect how much property tax you pay?

IIRC, something that significantly affects the value, like a new kitchen, is what'll get you reset to "current value".

[RosieSD]

Originally Posted by jnojr

IIRC, something that significantly affects the value, like a new kitchen, is what'll get you reset to "current value".

Yes, this is what happened to us. We refinanced and got a higher appraisal as part of that --- made no difference on our taxes.

We added new cabinets to our kitchen (a significant upgrade). We didn't do any structural changes to the kitchen beyond that. No permit required, and no change in our taxes.

Then, we added a small addition to our home (under 100 square feet) that required a permit, and that triggered a tax reassessment by the county and a small change in our taxes. So did adding a well to our property, which also required permitting and an inspection by the County.

So, I think basically if it is routine maintenance or cosmetic updating that doesn't involve a structural change in some way (i.e., building or tearing down walls, changing electricity or plumbing, etc.) then you won't be reassessed.

For kitchens, if you're just adding cabinets or changing the counters, not a problem. But if you are in essence creating a new kitchen by ripping down walls and moving the layout around in a substantial way, it may.

And if you're going to rip a fixer upper down to the studs and build a basically new structure, it probably will be reassessed after you're done. (There is an exception, I think, if your home is destroyed in some sort of disaster, like a wild fire or earthquake).

Here's the link to the California Board of Equalization page that explains in more detail what type of work can cause a reassessment by the county tax assessor:

https://www.boe.ca.gov/proptaxes/faq...ruction.html#2

The opposite can supposedly also happen. If your home's value goes down significantly, you can ask for a reassessment for tax purposes. I personally don't know anyone who has done that, but during the recession when home values took a dive, there was a lot of talk of it as a possibility in the media.

[honobob]

Your assessors office can provide the tax rate for each city in the county. The difference is the VOTER approved special assessments. Prop 13 will create your tax base at the time of purchase at market value. The sales price is rebuttably presumed to be market value. Your base can not increase more than 2% per year.
Changes in ownership and new construction CAN incrementally increase your base but the total property will not be reassessed.

Generally any additional square footage added will increase assessment. If you bought your home years ago and have a $100,000 base on a currently $600,000 home and you add a bedroom and the assessor can show that an extra bedroom would increase your value to $700,000 then they can add $100,000 to your base. Generally remodels do not trigger reassessment unless you go to the studs and reconfigure the layout. Some assessors are more and some less aggressive on this. It is still on them to prove that the remodel added market value.

As far as ownership changes if you deed 50% of your property to your brother then 50% will be reappraised. In the above example you will keep 50% of your $100,000 base and 50% will be half of $700,000 so $350,000 plus $50,000 equals $400,000 total new base on a $700,000 house.

Now if you're smart you won't give your brother 50% unless he is paying the mortgage. But if you are even smarter then you would transfer 50% to mom and claim parent child exclusion and then mom would transfer to your brother and ALSO claim the parent child exclusion so there would be NO change to the base. And you got your brother paying the mortgage!

[someguy10]

Originally Posted by honobob

Now if you're smart you won't give your brother 50% unless he is paying the mortgage. But if you are even smarter then you would transfer 50% to mom and claim parent child exclusion and then mom would transfer to your brother and ALSO claim the parent child exclusion so there would be NO change to the base. And you got your brother paying the mortgage!

Is there any kind of holding period in the double-transfer scenario? Can one put a property under an LLC or other entity at initial purchase so that later on one could sell the LLC (and, indirectly, the property) to anyone else and not trigger a reappraisal (since the property itself never changed hands)?

[honobob]

Originally Posted by someguy10

Is there any kind of holding period in the double-transfer scenario? Can one put a property under an LLC or other entity at initial purchase so that later on one could sell the LLC (and, indirectly, the property) to anyone else and not trigger a reappraisal (since the property itself never changed hands)?

No holding periods but I find that generally it is favored to record a day apart. Now if Grandma favors you but your parents hate you then the parent child exclusion is out but you could take advantage of the grandparent exclusion...if you are willing to solve the living parent problem. But you didn't hear it from me.

Prop 13 is Great but could have been accomplished WITHOUT giving the greater benefit to commercial properties or even residential rental properties that can charge market rents AND still have subsidized property taxes. PG&E was the winner when Prop 13 was passed, not Grandma in her $35,000 home in 1977.

Even all the exclusions of reassessment and tax base transfers benefit the more well to do than the common taxpayer.

Businesses have been hiding Changes of ownership since Prop 13 started under various corporate structures. Assessors are fighting back with rewards for people revealing scams and in the info age it is easier to detect the scams.

Call your assessor and ask for their transaction department. They can tell you generically what they do not consider a change of ownership. Generally as long as the percent of interest that each person holds in the property is the same no matter what legal structure the property is changed to then there is no reassessment.