Are You Getting All Your California Property Tax Breaks?

Either filing an appeal or claiming an exemption may reduce your California property tax burden.

California homeowners face some of the highest property taxes in the United States. Homeowners' property tax bills often dwarf any other state tax owed, particularly for property purchased in recent years when property values have been high. If you own a California home, you will want to ensure that you are not paying more property taxes than you absolutely must.

How can you reduce your California property tax burden? There are two main methods (per laws known as Proposition 13, Proposition 58, and Proposition 19). The first is available to all homeowners. The second depends on whether you meet certain qualifications. If you meet those qualifications, you can seek tax relief using both methods.

Method #1: Appeal the Taxable Value of Your Home

California has 58 counties, and some variation in policies and procedures for calculating and assessing property taxes. County authorities (known as "assessors") compute a homeowner's property tax by multiplying the home's taxable value by the applicable tax rate.

The taxable value is normally set based on the purchase price (the "base-year value"), but county authorities have the power to raise it by up to 2% each year in keeping with inflation, and to reassess a property's value under certain circumstances.

For example, when a homeowner has made significant improvements (for instance, installed a swimming pool, renovated the bathrooms, and so on), the assessor will receive a copy of the building permits, and may reassess at that time. The assessor can also set a separate base-year value on newly constructed portions of the home.

But mistakes can be made in these sorts of reassessments. It's even possible for the home's value to drop below its assessed value or purchase price, either because of conditions in the real estate market or a natural disaster. (If your neighborhood is struck with a hurricane, for example, home values would fall.)

One of the primary ways that you can reduce your overall tax burden, therefore, is by reducing the assessed value of your home—in other words, filing an appeal arguing that its assessed value is actually less than what the assessor assigned it.

The California Board of Equalization offers a helpful guide to the appeals process. You might, for example, argue that the home is in worse condition than the county assessor thought, or that the improvements were less extensive than the assessor's information showed.

Unlike in other states, however, arguing that a California home has been assessed at a higher value than other, similar homes in the area is likely to be a non-starter, owing to the wide variations in base purchase price.

Pursuing an appeal is time-consuming, but can be financially rewarding if successful. Consider this example. Bonnie and Clyde live in San Francisco County. The San Francisco County Assessor placed a taxable value of $900,000 on their home. If the tax rate is 1%, they will owe $9,000 in property tax. If Bonnie and Clyde successfully appeal, and the county appeals board reduces that value to $850,000, the savings will be significant. Now, Bonnie and Clyde would owe only $8,500 in property tax—savings that will compound over the years.

If you believe that the tax assessor has misjudged the value of your home, you might wish to contact your county assessor and pursue an appeal.

Another note on California's administrative structure: While the local county assessors offices control much of local tax policy implementation, these offices are overseen by the statewide agency known as the State Board of Equalization (BOE). The BOE acts in an oversight role to ensure compliance by county assessors with property tax laws and regulations. If you have questions or concerns that your local county assessor cannot answer, you might wish to contact the BOE's Property Tax Department.

Method #2: Claim All Tax Breaks to Which You're Entitled

Beyond reducing the taxable value of your home, California allows for exemptions from property taxes if you meet certain requirements. Unlike most states, which have exemptions governed by statutes or local rules, California's exemptions are articulated in the State Constitution (Article XIII). California also offers various forms of property tax assistance to certain homeowners.

The chief programs in California, which are implemented by county assessors' offices based on one's individual situation, are summarized here:

  • Main residence. The first $7,000 of the full value of your home is exempt from property tax.
  • Veterans. If you are a veteran who served in a war or campaign, you may qualify for up to a $4,000 exemption. This benefit can be claimed by a person currently serving in the military service or one who has been honorably discharged, as well as by the unmarried surviving spouse or either parent of a deceased veteran meeting the service requirements. A small catch, however, is that in order to qualify, the claimant may not own property, real or personal, worth more in aggregate than $5,000 if the claimant is single. If married, the couple may not own property worth more than $10,000. Learn more about the Veterans' Exemption on the BOE's website.
  • Disabled veterans. If you are a disabled veteran, you may be entitled to a heftier exemption than just the $4,000. The precise amount will depend on your age, income, and the nature of your disability. The BOE's website includes a lengthy description of this program, as well as the necessary application forms (which will require various forms of proof about your conditions).
  • Senior citizens who buy a new California home. If you are 55 years old or older and sell your principal California residence, you can transfer its base-year value to your new California home, if it's of equal or lesser value and you buy or have it newly constructed within two years of selling the first home. See the BOE's discussion of Transfer of Base Year Value for Persons Age 55 and Over – Propositions 60/90.
  • Disaster relief. In some counties, if your home has been substantially damaged or destroyed by a disaster, you qualify for a reduced assessment until your home is repaired or restored. In a county that has not adopted a disaster relief ordinance, you can ask the county assessor for a Proposition 8 reduction in your assessment.
  • Family transfers. If you acquire your principal residence from your parents or from your children, you will not face a full reassessment. This special treatment also applies if you acquire the home from your grandparents, but only if both of your parents are deceased. As of February 16, 2021, however (Prop 19's effective date), the property must be the transferor's principal residence, and you (the recipient) must claim it as your principal residence within one year of the transfer. Also, if the difference between the property's assessed value and fair market value is over $1 million at the time of transfer, the new assessed value will be its fair market value minus $1 million.

The BOE publishes a helpful online guide that explains these exemptions in greater detail. For further information about how you might be able to apply them to your situation, and any required forms you need to complete and the deadline for filing those forms, contact your local tax assessor. (See the BOE's county assessor directory.)

Finally, depending on the complexity of your situation, you might wish to seek legal help. To find an experienced real estate lawyer in California, check out Nolo's Lawyer Directory.

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