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A Landlord's Guide to the California Property Tax Rate

A Landlord's Guide to the California Property Tax Rate

45.14% of California homes are renters. The median rental rate for California renters is up at a record high of $1,614. Only around 4% of all rental properties available in California remain unrented. This is all good news for a property owner of rental property.

As a successful property owner, you must also prepare for the California property tax rate that comes with owning sought-after rental properties. 

Are you wondering about the California property tax rate and how it's calculated? Read on to learn more. 

California Property Tax Rate

As a property owner, you might already be well-acquainted with the high tax rate of California properties. 

Have you wondered why the property tax rate is so high? California is a large state with many programs that get funded by property taxes. 

Your property taxes, whether for your own home or that of a rental property, are calculated based on the value of the property. 

California is a large state with a high population. This makes real estate competitive and costly. While it's nice when your property is valuable when you sell it, you'll also pay taxes based on its current value.

CA Property Tax and How It Works

There are three departments in charge of arranging taxes on California properties. 

First, the assessor at the county level determines the value of your property. This information is then shared with the state auditor. 

The auditor is responsible for calculating what taxes you'll pay based on the assessed value. Then you're notified of what you owe in property taxes. 

Finally, once the taxes are paid, the tax money is distributed to different state, local, and county services. 

How California Property Taxes Get Calculated

An assessor is in charge of establishing the value of your California property. Once that value is set, generally speaking, the tax rate is around 1% of the value of the property. 

In some areas, there will be additional taxes because of special assessments from the county or community. Sometimes there might also be a special bond passed at the state level that would add to the tax rate. 

Rental Unit Business Tax and Exemptions

In some areas of California, rental property owners will be required to pay the rental unit business tax. This is a special tax specifically for properties that are used as rental properties. 

This tax is in place because the owner gets revenue from rentals. You can apply for some exemptions on your rental property rental unit business tax. Exemptions might include:

  • The rental property also is your primary residence
  • The renter in the unit is an immediate family member
  • The rental property gets classified as section 8 or low-income housing
  • You operate your rental property under the umbrella of a corporation/LLC

You'd have to apply for exemptions and prove your qualification yearly.

Understanding California Property Taxes

Understanding the California property tax rate is key to also being a successful rental property owner. You need to know your tax obligation so you can set your rental rates appropriately. 

If you're a property owner and are looking for a property management team, we can help. Contact us at Blue Line Property Management so we can get started helping you be a successful property owner.