Homeowners like to see their home increase in value — it means you made a good decision purchasing this property. Kudos to you!

But before you start high-fiving about how much your home is worth, you might want to take a closer look at your tax assessment.

Remember … the higher the assessment, the higher your tax bill.

Local jurisdictions send out property tax assessments each year, and you might be faced with these two dilemmas when you get yours:

1. What happens if you’re not happy with it and think it’s too high?

2. How do you prove that the true market value of your home is less than the assessor’s estimate? And do you need to challenge your property tax assessment?

Review Your Assessment Carefully

Whether you’re a new homeowner or not, you should carefully look at your assessment each year to look out for mistakes and understand the process. That way, you’ll know what steps you need to take if you want to appeal it in order to lower it.

This is why you are receiving a copy of your bill when your mortgage lender is actually the one paying it—because you, as the homeowner, are actually responsible for any mistakes. 

So when you receive this copy, take the time to make sure everything is accurate before your lender pays it.

Depending on home prices in your area, it could be an accurate reflection of your current home’s value.  Or, maybe not.

It’s up to YOU to find out since most local governments aren’t in any rush to reduce tax revenue on their own.

Many times you have a limited time to appeal challenge your property tax assessment, so know the deadline and the process in your jurisdiction! Become familiar with it now, so you’re prepared when you get that letter in the mail. Deadlines are very strict and must be met.

What Is A Property Tax Assessment And When Is It Reassessed?

1. Assessment Date (Lien Date):
   • The assessment is based on the property’s market value as of a specific date, known as the lien date. In California, the lien date is typically January 1st of each year.
2. Base Year Value:
   • The base year value is the assessed value established in the year the property undergoes a change in ownership or new construction. After the base year is established, the assessed value can increase by a maximum of 2% per year under Proposition 13, a California constitutional amendment passed in 1978.
3. Change in Ownership:
   • If there is a change in ownership, such as a sale, the property is reassessed to its current market value. However, certain exclusions and exemptions exist, and not all changes trigger a reassessment. For example, transfers between spouses or parents and children are generally excluded from reassessment.
4. New Construction:
   • When new construction occurs, the value of the new construction is added to the existing assessed value. This is known as the new base year value.
5. Annual Reassessment:
   • The property is reassessed annually, but Proposition 13 limits the increase in assessed value to 2% per year as long as there is no change in ownership or new construction.

Calculation of Property Taxes:

To calculate property taxes on a $700,000 home in California, we need to consider the assessed value, the applicable tax rate, and any special assessments or bonds. Keep in mind that tax rates can vary by location, so this is a simplified example. Let’s assume an assessed value of $700,000 and a combined local tax rate of 1%.

Example Calculation:

1. Assessed Value:
   • Let’s assume that the $700,000 home is assessed at its base year value, and there have been no recent changes in ownership or new construction. Therefore, the assessed value is $700,000.
2. Tax Rate:
   • For this example, let’s assume a combined local tax rate of 1%. This includes rates for schools, cities, counties, and special districts. In reality, tax rates can vary by location, so homeowners should check with their local assessor’s office for accurate rates. In Los Angeles you can check here in order to find out what the tax rate is in your county.
3. Calculation:
   • Property Tax = (Assessed Value x Tax Rate) + Special Assessments or Bonds
   Property Tax=($700,000×0.01)+Special Assessments or BondsProperty Tax
   • If there are no special assessments or bonds, the calculation simplifies to:
     • Property Tax=$700,000×0.01
     • Property Tax=$7,000

Note:

• This is a basic example, and actual property tax assessments can involve more complex factors, including special assessments, bonds, and other fees that may be specific to the local jurisdiction.
• Additionally, Proposition 13 limits the annual increase in assessed value to 2%, so the assessed value would increase gradually over time.
• Homeowners should consult their local assessor’s office or use online property tax calculators specific to their area for a more accurate estimate based on the current tax rates and assessment practices in their locality.

Must-Do Steps Before You Challenge Your Property Tax Assessment

Here are four steps you need to take to see if you should appeal your assessment.

1. Do Some Research

• Records are kept at your tax assessor’s office and can be seen any time to find out what your assessment value is for your property.

• Assessors use either replacement value or comparable sales prices to determine a home’s fair market value, which is considered the estimated price a home would fetch on the open market.

• Depending on the jurisdiction, the assessed value can be the full market value or a percentage of the market value (an assessment ratio).

• Homes aren’t always appraised every year but the assessor may apply average price increases from recent sales to adjust values for an entire area until the next full re-evaluation, which could be every 3, 7, 10 years or only when the property changes hands.

• Find out when the last full appraisal was in your area and how the value has been calculated since then. The longer the time has been since the last full appraisal, the more likely that the assessment value is off.

2. Correct Errors

• Make sure the description of your home is accurate. Verify the lot size, the number and type of rooms, and the square footage. This is very important, so look closely. If you live in LA you can check here to find out what your county assessor has on file for your home.

• Look for mistakes, such as a half-bath recorded as full bath or a screened-porch that’s included in your year-round living space. It happens more than you think, so double check.

• The Homestead Exemption in California is a legal provision that helps protect a portion of a homeowner’s equity in their primary residence from certain types of creditors and financial hardships. It is designed to provide some financial security and shelter for homeowners and their families. For more information on this in LA County check out think link. Here are some key points to understand about the Homestead Exemption in California:

• Protection of Home Equity: The Homestead Exemption allows homeowners to protect a specific amount of their home’s equity from being seized or liquidated to pay off unsecured debts, such as credit card debt, medical bills, and other personal loans.
• California’s Homestead Exemption Amount: As of my last knowledge update in 2022, California had two separate homestead exemption amounts. The standard exemption was $300,000 for individuals and $600,000 for married couples or heads of households. However, these amounts could change with updates to the law, so it’s essential to check for the most current figures.
• Automatic Protection: In California, you don’t need to file a declaration or take any specific action to benefit from the homestead exemption. It is automatic and applies to your primary residence as long as you meet the eligibility criteria.
• Eligibility: To qualify for the homestead exemption, the property must be your primary residence. You must also be the homeowner, and it cannot be used for business purposes. If you meet these criteria, you are generally eligible for the protection.
• Creditor Limitations: While the Homestead Exemption can protect your home equity from many unsecured creditors, it does not offer protection against certain debts, such as mortgages, property taxes, homeowner association dues, and government liens.
• Change in Equity: If you sell your home, the proceeds from the sale may be protected under the Homestead Exemption for a certain period, provided that you intend to reinvest the money in another home.
• Family Protection: In California, the homestead exemption also provides protection for the surviving spouse and minor children of a deceased homeowner.
• Bankruptcy and Other Legal Proceedings: The Homestead Exemption can be particularly relevant in bankruptcy cases, divorce proceedings, and other legal situations where assets may be at risk.

3. Compare to Other Homes

• Look at public records at the assessor’s office to see how your home stacks up to comparable homes in the neighborhood. “Comparable” means homes of the same size, age, and general location. For example, homes near a busy road are valued less than those next to a quiet park or wooded area.

• Hire a realtor or an appraiser if you can’t do the legwork yourself.

• Determine if your tax savings warrants a challenge … will the payoff be worth the effort?

4. Seek the Appeal

• If your assessment seems high and unfair, make sure you have the proof and the paperwork to back up any claims. You can’t just cry wolf so be prepared.

• The appeals procedure will vary by jurisdiction and it is critical to understand the system — deadlines vary. Again, you may want to seek the assistance of a tax professional, appraiser, attorney, or real estate agent to help you out in order to challenge your property tax assessment.

• Visit these websites for detailed information:

• Long Beach
• LA County
• Orange County
• Riverside County
• San Diego County

Don’t feel like you have to do this on your own, please reach out to me JDanielrealestate.com! I’ll make sure you have the correct forms to send for your appeal if you would like to challenge your property tax assessment. I can help you with calculating your home’s values by sending you a market analysis report.

JDanielRealestate.com