CA Property Tax Assessments Explained

Source: http://www.texastribune.org
Source: http://www.texastribune.org

The information below outlines the procedure California uses to determine the amount of property taxes you pay on your home:
In 1978, California adopted Proposition 13, which defined how your property taxes are calculated.
Annual Taxable Value
The annual taxable value of a home is determined by calculating which of the following amounts is lower:

  • Market Value (of the home on January 1)
  • or, Factored Base Year Value (FBYV)

Market Value
Every January, homes are assessed by your county to determine their market value (using comparable home sales during that time). This figure is then compared against the FBYV to determine the basis for your taxes.
Factored Base Year Value (FBYV)
The FBYV in year one of ownership starts out as the market value of a home when the property was transferred (applies to properties acquired after 3/1/75). So a home purchased for $300,000 would have a starting FBYV of $300,000.
The FBYV of properties that have not changed ownership since the prior January 1 is calculated by taking the FBYV from the prior year and adding 2% per year.
So ultimately your property taxes can increase a maximum of 2% per year from the original FBYV. However, there are times when a home can increase more than 2% in one year. This would occur if your property experienced any of the following:

  • A Change In Ownership
  • New Construction
  • Temporary reduction(s) in taxable value in prior tax year(s)

For Example:
Let’s assume you are trying to calculate your 2015-2016 taxes on a home that had a market value of $300,000 on January 1, 2015. Your first step would be to look at your previous year’s FBYV (taken from the prior year’s property tax bill). You would add 2% to this figure and compare it to the $300,000 market value figure. The lower amount is your taxable value for that year. You then pay taxes on the amount that results from multiplying your tax rate times that taxable value.
So if you purchased the above home last year for $200,000; this year’s FBYV would be $204,000 ($200,000 + 2% for year 1). This means your taxable value would be $204,000; since that figure is lower than the $300,000 market value.
The following year, the FBYV of this home would be $208,080 ($204,000 + 2% for year 2). So that following year’s taxable value would be determined by comparing that $208,080 FBYV to the market value in that year.
NOTE: The FBYV does not change with the refinance of a home; it only changes with ownership transfers or certain other situations (like when permitted construction is performed).
Feel free to contact us if you have questions about determining the taxes on your CA home…we’re here to help!
Information gathered from ocgov.com

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Chad Peshke is an experienced Financial Services Provider specializing in tax preparation, home loans and personal finance coaching. He holds a Bachelors Degree in Economics from the University of California in Santa Barbara and is licensed in tax preparation, loan origination, real estate and insurance. View all posts

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