Every week, Mansion Global poses a tax question to real estate tax attorneys. Here is this week’s question.
Q. Is California really a low-property-tax state?
A. In terms of residential property taxes, yes, according to H. Michael Soroy of the Law Offices of H. Michael Soroy in Los Angeles.
“When it comes to real property taxes, I believe it’s fair to say that California is really a low-tax state,” he said.
Property taxes are capped in California because of Proposition 13, an amendment to the state constitution passed in 1978 that limits real property taxes to 1% of the assessed value plus a maximum 2% annual increase, Mr. Soroy explained.
In addition, “real properties can only be reassessed when there is a change of ownership or when improvements requiring building permits are completed,” he said.
That means people who have owned their homes for a long time will not see big tax increases due to rising property values of nearby homes. And there are several reassessment exclusions, he added, including property transfers from parents to children.
Annual tax rates do vary throughout the state, as cities may charge additional levies, or parcel taxes, he said. Those additional levies could bring the total tax to about 1.2% of the assessed value, instead of the mandated 1%.
But California’s effective tax rate is even lower. The effective tax rate is based on the market value of the home, and the most recent property tax bills for the county. In 2018, the state had an effective tax rate of 0.76%, according to Irvine, California-based ATTOM Data Solutions.
California’s effective tax rate ranked 36th in the country, with the average property tax bill coming out to $5,354, according to ATTOM’s data.
That lower effective property tax rate is because so many properties do not change ownership for decades or for generations, while property values have posted healthy increases, Mr. Soroy said.