New property tax increase? (Sacramento: sales, 2014, how much)

[davidt1]

There is an 18% increase on my property tax bill that I just received. Is this normal? I thought prop 13 prevents any increases. Should I protest? Thanks.

[Galaxie Girl]

There are local entities that add to your property tax bill (on top of the 1% the county can charge per Prop 13). Did those rates increase dramatically? Prop 13 only allows the county tax of 1% of your property value to increase by 2% per year, so I'm assuming the other 16% (18% - 2% = 16%) is from local entities increasing their rates, but that seems pretty dramatic. Compare this year's bill with last year's to see exactly what changed and by how much.

Also, per Prop 13, your base 1% can go up by MORE than 2% in the following situation: if you bought a house and then values went down, you may have had your property tax amount go down as well if you had it adjusted. However, the permissible 2%/year increase is still clicking in the background, so when property values rebound, they are allowed to jump back up to what they would have been had the 2%/year increases kept happening. So if your house got assessed with a big increase after a decrease in value, you could see a larger than expected jump in property taxes. Hope that made sense; if not, hopefully someone knows how to explain that better than me.

[davidt1]

My tax for last year was $1,100. This year it is $1,300. I live in Sacramento County. Thank you for explaining this. The house was bought when property values went down. Now it has rebounded, as you explained.

Assessed value for last year was:

90,993

Assessed value for this year is:

99,670

It's the same house with same owner. Nothing has changed. If this continues, bill for next year will be around $1,500 and so on and so on? Aren't CA property taxes based on your purchase price of the property and remains unchanged for as long as you own the property?

[CA4Now]

Originally Posted by davidt1

Aren't CA property taxes based on your purchase price of the property and remains unchanged for as long as you own the property?

It never remains unchanged. But you can call that number on the back of your property tax bill (we did a few years ago, when it seemed that there were more assessments than usual) and they will explain each charge to you.

From what I've seen, the prop tax bills do seem to increase a couple of hundred a year, even if the homeowners don't do any major improvements to their property.

[Galaxie Girl]

No, it shouldn't keep increasing dramatically each year, just until it gets back up to the theoretical 2% increase limit. Prop 13 limits the tax to 1% plus a 2% increase per year, but if the assessed value goes down you can request that they lower your assessed value, thereby lowering your property tax amount. But that 2% increase each year based on your original purchase price is still going on in the background, and when the assessed value recovers, they can jack it back up to that cap.

For example (making numbers up here):
Purchase house in 2008 for $100,000. Bill in 2009 will be for assessed value of $100,000. In 2010, it will be $102,000. In 2011, it will be $104,040 (with the 2% increase on the previous value of $102,000). In 2012, it will be $106,120.80. In 2013, it will be $108,243.22.

Now, let's say values went down so that it's only worth $90,000 for the 2011 taxes instead of $104,040 so they drop your property tax assessed value to $90,000 for that year. Let's say it's the same for 2012, since the market is still low. But then we have a big pop in values, so for 2013 your house is suddenly worth $110,000. Well, they can't jack your assessed value up to $110,000 but they CAN raise it back up to what it WOULD have been for 2013 based on the 2%/year increases. So they bring your assessed value up to $108,243.22. Prop 13 allows them to catch back up to what they should have been following historical norms of inflation (2%/year), so in this one year period, your assessed value for your property taxes went from $90,000 to $108.243.22. That's over a 20% increase! You're thinking they're screwing you over with a huge jump in property taxes in one year, but really, you've been getting a deal for the last couple years because you were below the permitted cap increase of 2%/year. After that point, they can only increase it 2%/year. Of course, if they'd valued your home at $100,000 instead of $110,000 then you'd have a 11% increase instead of 20%, and they will still have room under their cap to be able to jack it up some more the next year if values continue to rise. But they can never exceed 2%/year from the year you purchased it.

Here's a chart I made to demonstrate, hopefully it comes out ok (can you make charts in C-D?):

Year -- Value -- Max cap with 2% increase -- Value used for property taxes -- Percent increase from previous year
2009 -- 100,000 -- 100,000 -- 100,000 -- N/A
2010 -- 105,000 -- 102,000 -- 102,000 -- +2%
2011 -- 90,000 -- 104,040 -- 90,000 -- -12%
2012 -- 90,000 -- 106,120.80 -- 90,000 -- 0%
2013 -- 110,000 -- 108,243.22 -- 108,243.22 -- +20%
From here on out, they can only increase it 2% per year since you're back to the max cap.


Now, as another example, you could see multiple dramatic increases if you don't get back to the max cap all in one year:

Year -- Value -- Max cap with 2% increase -- Value used for property taxes -- Percent increase from previous year
2009 -- 100,000 -- 100,000 -- 100,000 -- N/A
2010 -- 105,000 -- 102,000 -- 102,000 -- +2%
2011 -- 90,000 -- 104,040 -- 90,000 -- -12%
2012 -- 90,000 -- 106,120.80 -- 90,000 -- 0%
2013 -- 100,000 -- 108,243.22 -- 100,000 -- +11%
If your value for 2014 jumps up to, say, $115,000, they still have some room left before they hit the cap, so it will increase significantly again the next year. Again, they can't go above that 2%/year cap, regardless of assessed value.

Sorry I can't make the chart headers align in CityData better, hope it makes sense.

[DMenscha]

The 2% is a straight line limitation. If the valuation goes down (as it may have in the past few years) the valuation limit continues as if there was no previous reduction. It's entirely likely that this is a legitimate increase under Prop 13.

[Ultrarunner]

The reality is California is far from a low property tax State.

Prop 13 is often misunderstood.

All Prop 13 does is establish a base year value at the time of transfer with a 2% annual increase cap.

In addition... there are hundreds of taxing authorities in the State and with voter approval, as low as 55% for school infrastructure; these assessments are on top of Prop 13.

Many owners saw a temporary reduction due to market value declines... as soon as the market improves the temporary reductions of value disappear.

My guess is voter approved assessments are kicking in plus a reduction in the temporary reduction in value is being phased out...

[davidt1]

Galaxie Girl,

Thank you for taking the time to explain it to me. You are one smart person. Now I understand the 2% part, but I still don't understand the 1% in "Prop 13 limits tax to 1% plus a 2% increase per year."

[Ultrarunner]

Originally Posted by davidt1

Galaxie Girl,

Thank you for taking the time to explain it to me. You are one smart person. Now I understand the 2% part, but I still don't understand the 1% in "Prop 13 limits tax to 1% plus a 2% increase per year."

1% is the statewide property tax on assessed value.

Assessed Value is determined at the time of transfer and in most cases is the sales price.

The 2% is the inflation factor cap...

So a $100,000 property in a normal market could not be more than $102,000 the next year and $104,040 the following year not counting voter approved assessments.

[JGC97]

Originally Posted by davidt1

There is an 18% increase on my property tax bill that I just received. Is this normal? I thought prop 13 prevents any increases. Should I protest? Thanks.

It all has to do with Proposition 8, which also passed in 1978, allows the property to be temporarily reassessed at the lower value. However, as the value of the property rises, the assessed value and resulting property taxes may increase more than 2 percent a year up to the annually adjusted Prop. 13 cap.


(The Prop 8 referenced above is not the current Prop 8 in California.)