Propositions That Impact Your Property Taxes
Below are summaries of the main California Propositions that may affect your property taxes. If you have questions about property taxes in general, you can go to your county's website for more property tax information - El Dorado County, Sacramento County, and Placer County. If you have questions about Mello Roos and property taxes, go HERE. If you need additional proposition information you can contact the local tax assessor or you can go to the California Board of Equalization for further information on the California Propositions and how they may affect you as a homeowner, a home buyer, or a home seller.
The granddaddy proposition of them all is Proposition 13 which was the result of a bit of a California tax revolt and essentially established the base year value concept for property tax assessments. Those who owned their homes prior to 1978 initially reaped the greatest benefit as the 1975-1976 fiscal year served as the original base year in determining the assessment of real property. From there the annual increase over the base year value is limited to the inflation rate (using the California Consumer Price Index) or 2% whichever is less. Another benefit that came as a result of Proposition 13 is that the property tax rate is fixed at 1% plus voter approved assessment bonds (currently it is approximately 1.25%). This property tax rate (approx. 1.25%) is the calculation used whenever a property or any portion thereof has a change in ownership or if it has been newly constructed and it is applied to the value at the time the property is transferred. With the recent reduction in California home values, the stability of the property tax rate has been a contributing factor in home affordability for many first time home buyers. You can research the full explanation of Proposition 13 by looking up Section 2 of Article XIII A of the California Constitution.
Proposition 3 is a little less known and it allows for a transfer of a property’s base year value to a replacement property when a property has been taken as a result of eminent domain proceedings, an acquisition by a public entity, or a government action resulting in a judgment of inverse condemnation. There are specific requirements that must be met and you can find a full explanation of this Proposition by looking up Section 2 (d) of Article XIII A of the California Constitution and section 68 of the Revenue and Taxation Code.
Proposition 8 (Decline in Value) passed in 1978 which amended Proposition 13 to recognize declines in value for property tax purposes. Proposition 8 requires the county assessor to annually enroll either a property’s adjusted base year value (the Proposition 13 value) or its current market value, whichever is less. This usually becomes a topic of discussion when there is an extreme decline in property values. Most county assessors are on top of this since they are required to do so, but if your property taxes appear to grossly exceed the current property values then you should contact your county assessor or a real estate professional to look into the matter. Just remember that when it comes to taxes; what goes down will usually go up and when the markets improve the tax assessor can reinstate the Proposition 13 value. The reference for this Proposition is Section 2(b) of Article XIII A of the California Constitution and section 51 of the Revenue and Taxation Code.
Proposition 58 provides an exclusion from reassessment when real property transfers between parents and children. This is a great benefit to take advantage of.
Proposition 193 expanded this tax relief to include “certain” transfers from grandparents to grandchildren. There are some exclusions and specific requirements to adhere to. The reference for both Proposition 58 and 193 can be found in Section 2 (h) of Article XIII A of the California Constitution and section 63.1 of the Revenue and Taxation Code.
Proposition 60 allows for a homeowner to transfer the base year value from their current home to a replacement dwelling within the same county. There are certain requirements that need to be met such as at least one of the owners must be 55 years or older, the replacement property must be equal or less in value and no person on record (Title) has previously used this benefit. There is a provision that allows for an individual to use this benefit again but it must be based on a disability and it requires a different claim form. Be sure to verify the requirements on this disability provision as certain requirements need to be met in order to qualify. There are also certain situations that allow for the replacement property to exceed the value of the relinquished property and you should check with the local tax assessor for those guidelines. The reference for Proposition 60 can be found in Section 2 (a) of Article XIII A of the California Constitution and section 69.5 of the Revenue and Taxation Code.
Proposition 90 allows for a homeowner to transfer the base year value from an original property in one county to a replacement property in another California county. In order for the transfer to be eligible, the county where the replacement property is located must have adopted an ordinance that allows the transfer to take place. As of now there are 8 counties in California that have passed ordinances allowing these inter-county transfers to take place; Alameda, El Dorado, Los Angeles, Orange, San Diego, San Mateo, Santa Clara, and Ventura. The other basic rules of Proposition 60 apply to this proposition in that one homeowner must be 55 years or older, the replacement property must be equal or less value and the benefit can only be used once. The reference for Proposition 90 can be found in Section 2 (a) of Article XIII A of the California Constitution and section 69.5 of the Revenue and Taxation Code.
Proposition 110 modifies the benefits of both Proposition 60 and 90 to qualified disabled homeowners of any age. All of the other requirements of Proposition 60/90 still need to be met. One change that was made, and became effective September 25, 1996, allowed qualified persons who had a prior claim based on age to file a second claim based on disability. One stipulation is that once a person qualifies due to disability, they cannot receive the base year value transfer due to age. The reference for Proposition 110 can be found in Section 2 (a) of Article XIII A of the California Constitution and section 69.5 of the Revenue and Taxation Code.
Those are summaries of the main California Propositions that affect your property taxes and although they may not apply to you now, it is always good to keep an eye out to protect your interests. You are always advised to contact your tax professional, accountant, or attorney for any tax or legal advise regarding property taxes and property tax propositions and how they many affect you. Real Estate brokers and real estate agents do not provide legal or tax advise.