Jo, Your property will be assessed at 1% of the purchase price, or assessed value, whichever is higher. as that sets the new "basis". However, lenders, etc. figure it at a conservative 1.25% because of any assessments, i.e. library tax, Mello-Roos (if any) etc. The assessor may take the higher assessed value if say, I sell my house to my sister for $1,000.00 and she sells me hers for $1,000.00. We'd only be paying about $10/mo. so the assessor would use the higher valuation to avoid this, or else everybody would do this.
In June, 1978 the voters passed Proposition 13, which sets the value at the 1% starting point (A home valued at $500,000 would be billed at ($5,000/year--plus some supplementary add ons). Now, under Prop 13 the most they could assess your home at the next year (and subsequent years) would be 2% higher on the value ($510,000) so you would pay ($5100/yr.). Year following that $520,020, although your house may have gone up in market value by $50,000 (or down, in which case you can petition the assessor and try to get your assessment down).
You can find more information here:
http://www.sccassessor.org/portal/site/asr/
Furthermore, if you live in the home, you get a homeowner's exemption of $7,000 off the assessment, or roughly $5.83/mo. Big deal,eh? That figure has not changed since I started in this industry 22 years ago, when the median price of a home in CA was $133,640. A disabled Vet however gets a $100,000 exemption.
We enjoy a low property tax rate at 1%. Other states have it 3%, or even higher. Just thought I'd mention that as I just heard of a woman who purchased in TX who was from CA and she thought it was 1%. Big surprise. My home in AZ is taxed at a 3% rate, and commercial properties there are taxed at 8% (I think, I don't own commercial property there).
Remember also that property taxes are tax deductible on your income tax, if you itemize, which you should probably do if you start paying a home loan, which helps take a little of the sting out of it.
Example: If you buy a property for $500,000, and deduct the approx. $5,000 you paid in property taxes against your income, and your income tax rate is 25%, you would essentially be paying the IRS $1,250 less in Income Tax. Not earth shattering, but it helps keep the money local...
- Tue Jul 8 2008, 06:47