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A Property Owner's Guide to California Property Taxes

A Property Owner's Guide to California Property Taxes

Knowing the high price of California real estate, it might surprise most people to know that California property taxes are below the national average.

As a real estate investor, of course, you consider the price of a property. But it's important to pay attention to additional costs, like property taxes, that can add to expenses for a property.

So, what keeps California property taxes under control, knowing how costly property costs are? Read on to learn more about California property taxes for investment properties.

California Property Taxes

California property taxes are surprisingly simple and easy to calculate. First, you need to know the assessed value of a property.

To calculate the property taxes, you take 1% of the assessed property value. This 1% is based on the original purchase price when a property gets purchased.

Some counties will have additional assessments for things like special projects or education. It would rarely make the property taxes more than approximately 1.5% of the property's assessed value.

What if the value of the property increases? More on this later.

Property Tax Calculations

Whether you're buying a primary personal residence or an investment property for rental purposes, the good news is that calculating property taxes might be one of the simpler parts of property investing.

Look at the sales property assessed value and calculate 1%. Most counties also offer charts to show if there are specific assessments beyond the 1%.

Proposition 13

Proposition 13, passed in 1978, can take credit for keeping property taxes below the national average in California.

There were two key components to Prop 13. The first is the 1% of the assessed value for property taxes.

The second part that makes Prop 13 significant is that property assessments cannot exceed a 2% increase from the year prior. The intent is to protect property owners from spikes in property values pricing them out of their homes in property taxes.

Prop 13 was passed to protect from home values rising faster than income and inflation. Now, it's not uncommon for taxes to not keep up with inflation rates on the property.

When Are Property Taxes Due?

If you're wondering how to pay property taxes, most people choose to loop their property taxes in with their mortgage and have the mortgage finance pay the taxes. Taxes can be paid to the local county.

Property tax payments are due biannually. So, the first half of the fiscal year is from July 1 to December 31. This payment for that half is due on November 1. The second half of the year runs from January 1 to June 30. These taxes are due March 1.

Late payments should be avoided since they can add a 10% late fee in taxes to the property tax bill.

Supplemental Property Tax

If you're interested in property investing in California, you should know you can write off your property taxes on your California income tax.

As you consider purchasing investment property taxes, prepare for a supplemental property tax bill. This bill covers the discrepancy between previous tax rates and the new tax rate based on the most current assessment.

Paying Investment Property Taxes in California

Property taxes are a part of being a property owner, whether you're living in it as a primary residence or using it as an investment. It's good to be prepared for the cost of California property taxes.

If you're buying an investment property in the greater Bay area, you might want a property manager to assist you in overseeing the property. Contact us today to learn more about our property management services for investment properties.