Mastering Property Taxes

Mar 31

five things Every Homeowner Needs to Know

Are property taxes leaving you confused and overwhelmed? You're not alone.

But understanding how property taxes work is key to protecting your investment and your finances. Learn how property taxes are calculated, what factors influence your tax bill, and how to challenge your assessment if you believe it's incorrect.

Whether you're a new homeowner or a seasoned pro, this guide will help you take control of your property taxes and keep more money in your pocket.

More of a reader? Catch the video transcript below!

So today we’re talking about a topic that is crucial for every real estate owner to understand: property taxes.

We need to understand the process, how it works, how it’s assessed, and ultimately, how it can change along the way.

So, let’s hop right in.

Understand Your Assessed Value

The first piece of the puzzle is going to be to understand your assessed value. Your assessed value is the value that the tax assessor’s office gives to your property.

Now, it’s important to know that this is not what your property is actually worth on the open market — it’s just for tax purposes.

How is this calculated? Essentially, it’s whatever you paid for the property. So, if I just bought a property today for a million dollars, my assessed value is going to be a million dollars. However, in California, we have some laws that only allow property taxes to go up a certain amount. So, if my property value goes up 10%, my property might be worth $1.1 million, but the tax-assessed value is only allowed to increase by a maximum of 2% per year. So, for this example, that would make my tax-assessed value $1,020,000.

It’s important to know what your assessed value is because they’re going to take the value and then apply a tax rate to it. We’ll talk about that next.

Understand Your Tax Rate

In the county of San Diego, there are 14 different jurisdictions and each of them has a different tax rate (ranging from 1.1% to about 1.25%). If you live in San Diego county, you’ll fall somewhere in that range for your tax rate.

Then on top of that, there’s going to be what they call fixed charges and assessments. These are additional taxes above and beyond the base rate that cover things like mosquito control, some water charges, Mello-Roos taxes, etc.

So, there’s the assessed value, your base tax rate, and then the fixed charges and assessments. included in the overall scope of your tax bill.

Know Your Exemptions

The final step to understanding property taxes is knowing your exemptions. There are exemptions such as homestead exemptions, veteran exemptions, senior exemptions, and many others that could allow you to lower the assessed value of your property.

I don’t want to burst your bubble, but these exemptions don’t typically give you a ton of money off your assessed value — for example, I think the homestead exemption right now is just around $7,000. That’s not going to mean much in the grand scheme of things, but hey, a penny saved is a penny earned!

So, make sure you understand the exemptions you qualify for and learn how to lower your property taxes as much as possible.

Review and Understand Your Bill

Your property taxes get billed twice per year, so you’re paying property taxes every six months. Even if you’re paying your property taxes as part of your mortgage payment, you still want to make sure that you’re checking on your bill every six months to make sure you aren’t being billed for more than you should be. Also, you want to make sure your mortgage lender is actually making the payment, because even though the lender is supposed to pay it, it’s still your responsibility to make sure it gets paid on time.

I can’t tell you how many times we’ve walked clients through tax bills only to find that they’re incorrect. When you’re moving your property into or out of a trust, refinancing, adding a new spouse to the title, or taking one off, a lot of these changes should not trigger new assessments. But if you do the paperwork wrong or if someone files it incorrectly down at the county assessor’s office, you might find that they increase your assessed value and start charging you for more taces that you shouldn’t be owing.

So, my advice is to always, always, always review your bill to make sure that everything is correct and you aren’t being overcharged.

Make Sure Your Assessed Value is Accurate

The last thing you’re going to want to consider when assessing your property taxes is if your assessed value is too high for the value of the property.

If it is, you can appeal it to the tax collector and they’ll do a review and assessment and see if they need to bring your property values down.

Back in 2008 when the real estate market crashed, property values significantly decreased. There were a lot of people who went to the tax collector and said, “hey, my property is no longer worth what you are assessing me for and I want to appeal it” and they had success bringing their assessed value down.

So there you have it! Five things you should think about when it comes to property taxes whether you’re an owner, occupier, or a seasoned investor. It’s important that we’re not paying more taxes than we need to be so we can maximize our savings!

That’s it for me today, friends! Catch you in the next one!

Brent Edwards (aka Brent the Broker) is a residential real estate agent and Realtor in San Diego, CA who helps clients buy and sell homes in San Diego, California and all surrounding areas. Brent is a highly-recommended Realtor in San Diego by family, friends and past clients. Call Brent today at 619-550-8070 if you have any questions about real estate in San Diego or you'd like to buy or sell a home.