California is home to some of the most expensive places to live in the United States. The median selling price for a single-family home is just over $859,800. On top of high home prices, California residents also face some of the steepest property taxes in the country. That’s not likely to change soon given the record-high prices they have seen over the last few years. There are, however, a few ways homeowners can reduce their California property taxes.
Option 1 – Appeal The Taxable Value
In California, the State Board of Equalization (BOE) oversees the local county assessor’s offices which determine the property taxes in their area. Although each county has its own method, property taxes are generally determined by this formula:
(Taxable Value of Home) x (Applicable Tax Rate) = Homeowner’s Property Tax Amount
Under Proposition 13, the taxable value is based on the “base-year value” (purchase price), but county taxing authorities can legally increase the value by 2% annually due to inflation. They may also reassess a home’s value under certain circumstances, such as adding on a room or significantly upgrading a kitchen.
If a homeowner feels that there was an incorrect valuation of their home, they may be able to reduce their California property taxes by filing an appeal. Before moving forward with a formal appeal, however, homeowners should speak with their local county assessor’s office. County authorities can explain their valuation, answer questions about the assessment, and review any information provided by the homeowner that supports their stance that the assessment is incorrect. If an agreement cannot be reached, the homeowner may file an Assessment Appeal Application.
Although the appeal process is time-consuming, it can be financially rewarding. A reduction of just $50,000 in the taxable value of a home could equate to a $500 annual tax savings (based on a 1% tax rate), which can add up over time. To learn more about the appeal process and to determine the appropriate filing period, homeowners should access Publication 30, Residential Property Assessment Appeals online.
Option 2 – Take Advantage of Tax Breaks
Homeowners who cannot reduce the taxable value of their property through the appeals process may still have other options for lowering their California property taxes. Under the state constitution, there are various tax programs available. Some of the most popular include:
- Homeowner’s Exemption: If the home is the principal place of residence for the homeowner, they may receive a $7,000 reduction in the taxable value of the home. To receive the exemption, claim form BOE-266, Claim for Homeowners’ Property Tax Exemption, must be filed with the county assessor where the property is located.
- Veterans’ Exemption: Qualified veterans who own real property valued at $5,000 or less (if single), or $10,000 or less (if married), may receive an exemption of up to $4,000. Claim form BOE-261, Claim for Veterans’ Exemption, must be filed annually.
- Disabled Veterans’ Exemption: Qualified veterans who are 100% disabled due to a service-related injury or disease, as well as the unmarried surviving spouse of a qualified disabled veteran, may be eligible for either the basic or low-income Disabled Veterans’ Exemption. The basic exemption is available regardless of income level and is compounded annually by an inflation factor. The low-income exemption is only available to those whose annual income does not exceed the specified threshold, which is currently $72,335. For 2023, the exemption amount is $161,083 for basic and $241,627 for low-income.
- Proposition 60/90: California residents over the age of 55 who sell their principal dwelling and purchase a replacement home of equal or lesser value within two years, may transfer the previous home’s base year value to the new home – if the county authorizes the transfer. To learn more about Proposition 60/90 eligibility, follow this link.
- Decline in Value: Under Proposition 8, California homeowners who suffer a decline in value due to a dramatic drop in the real estate market or a disaster (storms, wildfires, earthquakes, etc.) may receive a temporary reduction in the assessed value of their homes. This is known as “decline-in-value” status.
Previously, you could also keep California property taxes to a minimum by transferring your principal place of residence to your child or grandchild. In these instances, the property value was not reassessed for tax purposes. Unfortunately, this now only applies to transfers that took place between November 5, 1986, and February 15, 2021.
Got California Property Taxes? Call Us.
If you need assistance with your California property taxes, give the tax experts at Tax Defense Network a call. We have numerous locations throughout the state, so we can meet with you in person or online. Schedule your free consultation today!