Before you buy a home in California, earn the real estate tax information that could influence your decision about a particular property. California real estate taxes are complicated, but you can navigate them with the right information and some expert advice. Here are six facts you need to know:
California Real Estate Taxes Are More Than One Tax
The final rate you pay isn’t just one tax. The largest line you’ll see on your property tax bill is the 1%, which applies to everyone across all jurisdictions. You pay 1% of the assessed value of your home.
Depending on your location, you’ll see other charges and taxes on your bill, though none as large as the 1%. These include Mello-Roos taxes, voter-approved debt rates for things like the school district, and levies for shared infrastructure like sidewalks and street lighting. To find out what specific taxes will be applied to a property, talk to your realtor.
Assessments Happen When Property Sells
Most of the time, a property sale will trigger a reassessment of that property’s value. After that, the assessed value automatically goes up by 2% every year until it sells again. There are some types of property transfer that won’t trigger a reassessment; check with your realtor to learn more.
If you buy and then build a new structure or improvement, the value of the improvement will be assessed separately from the value of the original real estate. So, for example, if you buy a home in 2019 and build a new garage in 2021, the home will be taxed at the 2019 assessed value while the garage gets taxed based on the 2021 value.
Not All Improvements Raise Assessed Value
Fortunately, not everything you do to a property is going to cost you more in taxes! If you improve your home to use solar energy, this won’t raise your assessment or your taxes. The same is true for improvements you make for fire or seismic safety.
Additionally, if you need to improve accessibility for the disabled, you won’t pay more in taxes. You can also safely reconstruct after environmental contamination or after a natural disaster without worrying about paying more in tax.
Don’t Confuse Real Estate Tax and Property Tax
Most of use these terms interchangeably and normally that’s fine. But to the government, there’s a big difference. Real estate taxes cover only your real estate, like a home or rental property. Generally, if it can’t be moved without damaging it, it counts as “real estate.” Property taxes can include anything that is “property,” like your furniture and car.
Real estate tax issues don’t apply to personal property, and most people don’t pay tax on any personal property other than their car. But there are some exceptions worth knowing about. In California, personal property that falls into the “luxury” category can be taxed. If you’re talking to a tax assessor from the government, always make sure you know what items fall into which category.
Veterans Get Exemptions
If you’re a veteran and own or buy property worth less than $5,000 if you’re single and $10,000 if you’re married, you are exempt from paying real estate taxes up to $4,000. For disabled veterans, that exemption goes up to $100,000–$150,000 depending on your income status.
Someone Pays at Sale
When you make your final transaction to either buy or sell real estate, you have to pay taxes on it. In California, state law demands 9.55% of the total sale price of the home in tax, unless the property sells for less than $100,000. As to who pays this tax, that’s something the buyer and seller can negotiate. Generally, however, in Southern California the seller pays. There are also taxes assessed at the county level and city levels. In LA, there’s a 0.45% city transfer tax and a 0.11% county transfer tax.
Find Out More About California Real Estate Taxes
Don’t get an unpleasant surprise when the real estate tax bill comes in. Call Teresa Mack today to find out more about properties you’re interested in and how real estate tax will affect you.