CA Prop 13

[tb001]

I know we have a bunch of CA residents here. I'm curious about how you think about property taxes from an inflation perspective. We have an expensive home, with high property taxes, but in theory, prop 13 should limit those tax increases to 2%/yr (with maybe a bit of extra for the local add-ons...). I had just kind of figured this comes out in the wash, but since it's such a large part of our current spend, accounting for that extra 2% inflation actually takes us from 95% success to 100% success.

For those who have lived with this for a while, is the 2% cap really 2%ish? Do you think about this when planning?

 

[MichaelB]

A policy question, so the thread was moved to a more appropriate sub-forum

 

[tb001]

A policy question, so the thread was moved to a more appropriate sub-forum

Is it? For me, it's far more a financial question vs policy!

 

[Peter]

The cap is real, although local add-ons (bond measures, etc.) can add up to more than 'a bit extra'.

 

[tb001]

The cap is real, although local add-ons (bond measures, etc.) can add up to more than 'a bit extra'.

Do you have a feel for how much they've impacted your inflation rate historically? I'm thinking if I give this a 2.5% inflation rate, that would account for the bond measures?

 

[Peter]

To be honest, I've never looked at it that closely. But to give you some idea, our current property taxes are ~$8,500 under the 'general tax rate', but with a total 'tax payable' of ~$10,700. I believe the general rate is the part subject to Prop 13. So the local add-ons are about 20% of the total.


I suppose you could assume the add-ons increase at some rate related to inflation, and calculate the overall effect from there. Your 2.5% figure may be close to the mark, but, as I say, I've never bothered with that much detail, when there are so many other things going on that will affect success probability.

 

[ronin]

In my experience, having tracked it for a long while, the total increase in my property tax bill, including all the extra fees that are added to get around the 2% cap, has usually been at least 3% p.a. and sometimes closer to 4%. Probably depends on specific location as well.

The biggest hit recently though was to move to a 1/3 more expensive home and see our bill jump to nearly 3x higher. It was not unexpected as we'd lived in our 1st home for 35 yrs.

 

[Another Reader]

Tax bills won't be out until next month, but my house was purchased for around $354k, has an assessed value of around $560k (indexed base), and I'm expecting a bill of just under $9,000, thanks to voters that never met a fee, parcel tax, or bond issue they did not like. I inherited a property with a 1975 base value. That value was originally transferred to a property in my county by a parent moving into a retirement home and crossed the $100k assessed value last year. I expect a tax bill of a little over $1,900.

Supposedly I can apply for an exemption from a school assessment on my property because I'm over 65. It's under $100 and you have to appear at the school district office with some paperwork to get it. Too late for this year.

ETA: Net assessed value after homeowner's exemption is $576k. Must have missed a year... Bills out October 1.

 

[RobbieB]

I bought my house in the central valley 30 years ago for 127 grand, now worth 450. Property tax is about twenty two hundred.

I like prop 13!

 

[cathy63]

I happened to have five years of data that was easily accessible in Quicken so I pulled a report. Here are the actual property tax amounts (by year of invoice) and the calculated percent increase for two properties located in the same town.

For 2018 each property is assessed 1.05615% of net value plus $522.14 in fixed fees, and the residence gets a -$70 homeowners exemption.

Year	Residence		Rental
2014	$6,590.00		$3,205.00
2015	$6,768.32	2.71%	$3,305.98	3.15%
2016	$6,891.50	1.82%	$3,379.30	2.22%
2017	$7,121.68	3.34%	$3,501.94	3.63%
2018	$7,327.40	2.89%	$3,585.74	2.39%

 

[daylatedollarshort]

We've lived in our house for several decades and the taxes are now around .3% of the current market value. I don't remember what property taxes were when we bought the house but the annual increases, if more than 2%, certainly have not been any kind of budget buster amounts, at least in our city and county. We vote for most of the bond measures. The good schools, libraries and parks are part of what keeps up our property values and makes our area a nice place to live.

 

[fh2000]

I do not have the actual data. We lived in our current house for 29 years now. I used spreadsheet to calculate. If the original tax rate is 1% of the original property value, my house value has increased 3.8% annually, and tax rate increased 2.2% annually, for the past 29 years.

 

[tb001]

In my experience, having tracked it for a long while, the total increase in my property tax bill, including all the extra fees that are added to get around the 2% cap, has usually been at least 3% p.a. and sometimes closer to 4%. Probably depends on specific location as well.

The biggest hit recently though was to move to a 1/3 more expensive home and see our bill jump to nearly 3x higher. It was not unexpected as we'd lived in our 1st home for 35 yrs.

That's really helpful, thank you!

Were you not able to take advantage of the >55 exclusion/transfer due to the cost? That was huge in our decision to relocate last yr.

 

[tb001]

Thanks so much for all of the responses--hugely helpful! I think just ignoring the impact is clearly more conservative than necessary, given the large % of our spend in today's dollars. It sounds like somewhere between 2.5-3% is probably a good place to land.

 

[alterreur]

I am in the same boat as Robbie.. Payed $147000 22 years ago now worth $500K plus and property tax is $2250 last year.. The only real thing I can say good about California that loves to tax..

 

[MichaelB]

In my experience, having tracked it for a long while, the total increase in my property tax bill, including all the extra fees that are added to get around the 2% cap, has usually been at least 3% p.a. and sometimes closer to 4%. Probably depends on specific location as well.

The biggest hit recently though was to move to a 1/3 more expensive home and see our bill jump to nearly 3x higher. It was not unexpected as we'd lived in our 1st home for 35 yrs.

Florida taxes property this way, so two homes with similar values can have much different property taxes, depending on when they were purchased.

After the housing crash in '08, property taxes on homes with low rates continues to increase yearly at the same rate as before, the max allowed by law, while taxes on homes of similar value with much higher taxes remained flat. An equalization of sorts, this went on for at least 5 years.

 

[RetiredAndLovingIt]

I've lived in my house for 27 years now. Purchased for 15K, right now maybe worth 350K. My records only go back as far as 2002 but here is a snapshot. I did challenge the assessment a couple of times to get it reducedafter the meltdown in 2008. I'm pretty sure Prop 13 is under attack with another ballet measure in November or at least it was talked about earlier this year.

2002 $1897
2003 $2055
2004 $2454
2005 $2434
2006 $2444
2007 $2474
2008 $2537
2009 $1913

2010 $1671
2011 $1681
2014 $2066
2015 $2625
2017 $3048
2018 $3140

 

[Freedom56]

Our property tax for our home in Southern CA has been inching up by about 2% per year. The taxes jumped slightly more when we added the pool about 14 years ago. Florida is another story. I received notice from Palm Beach county last week that the proposed budget, if approve will increase by 27% if the new budget measures are approved, and by 12% if they are not. When we bought our condo in Florida in 2011, the property taxes were $1872. In 2018 the taxes were $4480. The 2019 proposed taxes would bring it up to $5689. If we compare the two residences (both are owned free and clear), it costs less to live in a 5 bedroom 3 bath home with a pool and spa in Los Angeles County close to all the major attractions than in a 2 bedroom 2 bath condo in Palm Beach county (Downtown Intra-Coastal). In 2011 the opposite was true. From our experience, California is relatively inexpensive for retirees if you own your home free and clear and you purchased it a long time ago, keeping your property taxes low.

 

[alterreur]

They are talking about putting Prop 13 on the ballot but it’s pertaining to Commercial Property not residential. Who knows, maybe we are next..

 

[pdxgal]

[QUOTE...California is relatively inexpensive for retirees if you own your home free and clear and you purchased it a long time ago, keeping your property taxes low.[/QUOTE]

Very true. I bought a CA condo for $142k in 1995. This thread prompted me to check how much the property taxes have gone up since. Looks to be about 3% annually. 24 years ago taxes were about $1700, now they're double that.

By comparison, in 1998 I moved to OR and bought a house here for $180k. The property taxes at the time were a little over $3k, as I recall. Now they're inching up to almost $7k. Oregon has Prop 50, similar to Prop 13, but the cap is 3%. Where I live there've been LOTS of local levies though that push the annual increases often much higher. My CA condo is now worth about 80% more than my OR house, but the taxes are about 50% lower.

Ironically it would probably be cheaper for me to return to live in HCOL Bay Area than Oregon in retirement. Though I'm not sure I'd enjoy it. Every time I go back to visit, the stress of the rat race that is life there is palpable.

Prop 13 was really a godsend. It saved folks like my parents. My dad was a Bay Area native, taught at the local high school in an area that became quite wealthy, with rapidly rising home prices. If it hadn't been for Prop 13 we probably would've had to move.

 

[wolf]

They are talking about putting Prop 13 on the ballot but it’s pertaining to Commercial Property not residential. Who knows, maybe we are next..

Purchased property prior to prop 13, and after. If not for prop 13, would have been "taxed" out of the area. California legislators, love to "tax", to solve their
spending habits.