Property taxes are confusing for California homeowners. How much do you have to pay? How is that amount calculated? Did your lender already pay it?
Whether you’re in San Francisco County, San Mateo County, Alameda County, or any other CA county, your property taxes will generally work the same way. Here’s what you need to know about property taxes as a California homeowner.
It all starts with an assessed value...
What is an Assessed Value?
The assessed value of your home is the value that your property taxes are based on. But the assessed value is a little confusing because it isn’t just the current value of your home. In fact, your home’s assessed value is probably a lot lower than the real value because of a handy piece of legislation known as Prop 13.
Proposition 13, passed in 1978, limits the increases on your property value for tax purposes to 2% per year. So if you bought a home for $1.5 million in 2020, your assessed value for 2021 would be capped at $1,530,000 (even though values are currently up 17.7% in Alameda County, which would make the real value closer to $1,765,500).
Normally, when you buy a home or complete construction on a home, your assessed value gets reset to the current market rate. Then the Prop 13 cap applies to that home until you either sell it or take on such a massive renovation that it’s considered new construction. But in 2021, the rules changed for people over 55 thanks to Proposition 19. Prop 19 allows senior citizens to keep their cap when they move to a property of equal or lesser value. This gives seniors the option to downsize without facing an insane property tax bill increase.
How are Property Taxes Calculated in California?
Property taxes start by taking the assessed value times the local tax rate. Tax rates vary by neighborhood, but you’ll usually see the rate between 1.1% and 1.5% in the Bay Area. Then “special assessments” are added to account for local services like fire protection or special projects like expanding local infrastructure. Special assessments are flat fees that are unrelated to the assessed value of your home. In most cases, special fees don’t add more than a few hundred dollars to your annual bill.
When are California Property Taxes Due?
California property taxes are paid in two installments. The due dates listed on your tax bill are usually around November 1 of the current year and February 1 of the following year. But there is no penalty until the delinquent dates, which are December 10 and April 10.
But before you pay your property taxes, check with your lender to see if they will make the payment on your behalf. Most lenders keep an escrow account for necessities like homeowners insurance and property taxes. The costs are rolled into your monthly mortgage payment, and the funds are paid out as needed to make sure you don’t miss a payment that could put the property (and the lender’s investment!) in jeopardy.
How Do I Get My Tax Bill?
Your county tax collector will mail you a tax bill every year, usually in October. But if you haven’t received your bill by November, you can contact your county tax collector’s office to request a copy. Most California counties even have a tax bill finder on their website where you can get a copy yourself.
How CA Property Tax Law Affects Homebuyers
If you’re looking for a home online, you’ll often see an “estimated property tax” section in the listing. In most cases, these estimates are based on the current owner’s tax amounts, which could be much lower than the taxes you would pay. Remember, the current owner’s assessed value may have been capped for years. And if you’re under 55, your new purchase will reset the assessed value to the market rate (typically the purchase price).
A good buyer’s agent knows this. And can help you estimate the property taxes on a listing more accurately than real estate websites like Zillow. If you are thinking of buying a home in the Bay Area, contact Sequoia Real Estate. Our experienced buyer’s agents understand how complex factors like property taxes impact your purchase and can advise you accordingly to help you make the best possible purchasing decision.