Why Can California Property Taxes be Reduced?
by John Occhi
Building up to my Real Estate career, I have been involved over the years, in many aspects of the industry. I have worked with contractors providing home improvements, I have inspected and retrofitted mobile homes for earthquake and other safety issues, I owned a Landlord referral and eviction service. I even helped commercial tenants dispute and correct their commercial leases. One of the positions that have helped me understand real estate value, more than any other is as a property tax consultant. I worked helping property owners reduce their property taxes when values were plummeting.
So, I thought I would offer this short explanation as to why taxes can be reduced in California. I wrote it some time ago, and it may be on another website somewhere, but please go ahead and see if what I have to say makes any sense to you.
The Tax Revolution Begins
In 1978, the voters of California passed a constitutional amendment that has forever changed the California property tax system. The ballot measure is still referred to as Proposition 13, or Prop 13 for short. Since 1978, Prop 13 has been the foundation of the property tax system in California.
Prior to Prop 13, California was like nearly every other state in the county when it came to property taxes. We were an existing market value system, assessing property based on current market value every 5 years. Prop 13 changed the entire format to an acquisition value based system whereby values are typically assessed only at the time of purchase and then limiting the increase to the assessed value by no more than 2%, which is referred to as the factored base year value. Prop 13 limits the amount of tax collected to 1% of the assessed value plus any amount that local voters have approved to fund necessary bond indebtedness.
The result of Prop 13 is that each County Assessor must enroll the lesser of either the current market value for the property on January 1st (known as the ‘lien date') of that tax year or the factored Proposition 13 base year value as the assessed value for the current tax year.
Proposition 8
Proposition 8 recognizes that current market value of property may fall below the current factored base year value.
When the current market value does reverse itself from the factored base year value then property owners have the right to submit an informal request for a "Decline in Market Value" reassessment.
Often times, agreement to the reassessed value cannot be amicably reached at which time a formal appeal can be filed with the Assessment Appeals Board. Often times, the Assessors office will simply allow the Decline in Market Value to expire, without action.
If you do not agree with the response you may have received or you simply have not received any response from the Assessors office you must file the formal appeal to protect your appeal rights.
If and when the market value of property that has previously received a reduced assessment (Prop 8) increases to or above its factored Prop 13 base year value, then the Assessor will restore the new adjusted Prop 13. These reductions are only temporary.
So Now What do You Do?
If you believe you have a legitimate claim to reduce your property taxes, let me know and I'll do what I can to steer you in the right direction to do it yourself, or I might even let you hire me - depending on how busy I am at the time. I do still know a few folks in the business today, so let me know how I can help.
Have a Blessed Day,
JOHN OCCHI, HEMET REALTOR
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