Vincent Kabl…, Home Buyer in Los Altos Hills, CA

Property tax in Los Altos Hills CA

Asked by Vincent Kabler, Los Altos Hills, CA Wed Jan 2, 2013

There is a property that was sold in 1997 for 1 million. It is owned by a living trust between the husband and wife.

The current taxable value is:
Land $219,217
Additions $330,065
Total $549,282
Taxes (2011) $7,611

The property is listed for sale at 3 million.

My questions are:
1. Will there be a reassessment as soon as the buyer gets the keys ?
2. What will be the new property taxes ?
3. Is there any way to reduce property taxes in this scenario ?

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Answers

6
Steven Ornellas’ answer
Hi Vincent,

"1. Will there be a reassessment as soon as the buyer gets the keys ? "
Not really. The sale/sales price will be recorded, and then it may be up to around 6 months before you are sent a one-time Supplemental tax bill covering the increased value established by the sales price.

"2. What will be the new property taxes ? "
1.25% is a common "quesstimate"; however, your effective property tax bill actually consists of three separate levy categories: General Tax Levy, Voter Approved Indebtedness and Direct/Special Assessments.

"3. Is there any way to reduce property taxes in this scenario ?"
Not initially and not until you can prove the market value of the home has dropped via a Prop 8 appeal.

Please review additional information covering your questions at:

"Estimating Property Taxes in CA"
http://www.trulia.com/blog/steve_ornellas_mba_re_mastersgri/…

-Steve
1 vote Thank Flag Link Wed Jan 2, 2013
BEST ANSWER
Yes, there will be a reassessment of the property taxes based on the new sales price, The amount of the property taxes on the new assessed value after the close of escrow can be got from the Santa Clara County Tax Assessors Office. The Supplemental Tax Bill based on the new value is generally sent out a couple of months later as it does take the County sometime to update their records based on the new value of the home. There are ways to reduce the property taxes in this scenario.
0 votes Thank Flag Link Wed Jan 2, 2013
Your questions are:

1. Will there be a reassessment as soon as the buyer gets the keys?
A: Yes. The property will be reassessed at closing.

2. What will be the new property taxes?
A: As stated below, $1.25 per thousand dollars of purchase price. Taxes for a $3,000,000 purchase price will be approximately $37,500 per year. Your transaction will more than likely be taxed on the previous rate, and then you will receive a Supplemental Tax Bill a few months down the road which will not only recognize the new tax rate, it will also collect back taxes due for the balance owing from close of escrow until the time of the notice.

3. Is there any way to reduce property taxes in this scenario?
A: Taxes are directly tied to purchase price. Your only solution is to lower the price. If that is not an option, then the answer is “NO.”
1 vote Thank Flag Link Wed Jan 2, 2013
When properties are sold the Tax Assessor will normally use the sale price as the new assessed value. Property tax rates vary in Los Altos Hills but a good rule of thumb is to use 1.25% of the assessed value as the annual property tax. When a property is sold and the new property tax is higher than for the previous owner – the new owner will pay the tax bill from the previous owner – and will usually within 2-6 months receive a supplemental tax bill – which will be for the difference between what the seller was paying and the new property tax bill. Normal property tax bills are due by April 10 and December 10 each year – supplemental taxes are due soon after receipt.

There are ways to keep the previous sellers property tax assessed value. If you are related to the seller in specified ways (parent to child, grandparent to child, etc.) then the existing assessed property tax value can be transferred to the new buyer. There are limited other ways to keep the assessed value low - but few properties in Los Altos Hills fall under those special property tax rules.

The reason the seller is paying much lower property taxes is that they fall under proposition 13. Google "California Proposition 13" for more details.
1 vote Thank Flag Link Wed Jan 2, 2013
Yes Vincent, there will be a reassessment according to the new sale price, and the Buyer will have a complementary tax bill within several months after the closing of transaction.
The amount of your of new taxes should be discussed with your tax advisory. Brokers and Realtors are prohibited to give legal or tax advice because they don't have such a licensing.
Yes, there is the way how to reduce or eliminate your immediate tax exposure, and it can be discussed closely with the realtor of your choice.

Best Regards,

Andrei Bandrovsky..
0 votes Thank Flag Link Wed Jan 2, 2013
Hi Vincent,

The property tax will be based on the purchase price. Have your Realtor look in the tax records for the tax rate and any Special Assessments. This will allow you to calculate the yearly taxes.

Shanna Rogers
SR Realty
http://www.RealtyBySR.com
0 votes Thank Flag Link Wed Jan 2, 2013
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