Real Estate Taxation

What are the conditions that need to be met for proposition 60 and 90?

- At least one of the homeowners must be 55 years of age or older. - The replacement property must be purchased within two years of the original sale. - The new home must be of equal or lesser value if the recordings are simultaneous. If the new property closes during the first year after the old home, the price may go up by 5%, and if the new property closes during the second year after the old home, the price may go up as much as 10% over the old selling price. The new home must be in the same county (or in another "participating" county).

What are some circumstances that are exempt from the reassessment?

- proposition 58: transferring property to spouse or children -Propositions 60 and 90: homeowners may be permitted to transfer their current Proposition 13 tax base with them if certain condition applies.

Where do real property tax money goes to?

A city's or county's operating revenue

What are the capital gains exclusions associated with the sale of a personal residence?

A single seller can exclude up to $250,000 of gain and a couple can exclude up to $500,000.

Under what circumstances can a loss on the sale of a personal residence be deducted from income taxes?

Normally, under no circumstances. But if the property is converted to an income-producing rental, then a loss on the subsequent sale could be deducted.

What is the order in which taxes are processed in California?

On January 1, the taxes for the upcoming fiscal year become a lien on the property. Tax year begins on July 1. On November 1, the first installment for half the taxes becomes due. On December 10, at 5 p.m., the first installment becomes delinquent if not paid and a 10% penalty charge is added to the bill. On February 1, the second installment for the balance of the taxes comes due. On April 10, at 5 p.m. the second installment becomes delinquent if not paid and a 10% penalty charge is added to the bill. **If taxes are due on a weekend or holiday, the due date or delinquency date is extended to the close of the next business day.

What items can an owner of an income-producing property deduct that an owner of a personal residence cannot?

Operating expenses and depreciation.

What is the documentary transfer tax?

The California tax laws allow a county or city to adopt a documentary transfer tax to apply to the transfer of properties located in the county. The tax is computed on the total price paid for the property, less any assumed loans. The tax is computed at the rate of 55 cents for each $500 of consideration or fraction thereof.

What is important for a broker to remember about the Foreign Investment in Real Property Tax Act?

The buyer is responsible for withholding 15% of the sales price if the seller is a foreigner and the home is priced over $300,000. If the money is not withheld, the buyer and broker are equally responsible and the broker could end up paying the entire unpaid taxes due.

What is the fiscal year where in California property taxes are processed?

The fiscal year starts on July 1 and ends on June 30.

For whom do property tax exemptions exist and for how much?

There is a homeowner's exemption for $7,000 against the assessed value and a veteran's exemption for $4,000 against the assessed value.

How are taxes accessed?

real property is reassessed every time it is transferred. The property tax is usually set at 1% of the selling price.

Who determines the amount of real property taxes (also called ad valorem taxes) based on the assessed value of the property?

the county assessor.

Who is responsible for collecting these taxes, which are paid annually or semi-annually?

the county collector.

Who must the buyer notify when they first acquire a new property?

the county recorder or assessor by filing a change in ownership statement within 45 days of the date of recording or, if not recorded, within 45 days of the ownership change. If this is not done, the owner will pay a penalty of $100 or 10% of the taxes applicable to the new valuation, whichever is greater.

what is proposition 13?

the maximum annual tax on real property is limited to one percent (1%) of "full cash value," or market value, plus a maximum two percent (2%) increase in market value per year.

What is a supplemental tax bill?

the new property owner will receive a property tax bill along with a supplemental tax bill which the county assessor revalues the property and if they find it to be higher than the current bill then they send a supplemental bill.