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)
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
Temporary reduction(s) in taxable value in prior tax year(s)
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 fromocgov.com
Even though we know the mortality rate is 100%, we don’t want to deal with the topic of death while we’re alive. Because of this, many people disregard prudent financial moves that will make life much easier on their surviving beneficiaries.
Among the most neglected is Living Trusts. Here are 6 reasons you’ll want to consider a Living Trust for your family:
Protect Property for Beneficiaries
Protect Privacy of Estate
Avoid a Will Contest
Reduce or Eliminate Estate Taxes
Manage Property Upon Incapacitation
Take the time to protect your family. It’s more important than planning that summer vacation; and may not take any more time or money!
What are your thoughts on Living Trusts? Why or why haven’t you secured a Living Trust for your family? Let us know your thoughts!
As we quickly approach the last quarter of 2014, we want to give you some tax planning strategies to help decrease your tax liability.**
A little planning can go a long way! Here’s an easy-to-read guide:
Max Retirement Plan Contributions
401k’s – save up to $17,500 (+ $5,500 additional if over 50 years old)
Traditional IRA’s – save up to $5,000 (+ $1,000 additional if over 50 years old)
Max Health Savings Account Contributions
Single – save up to $3,300 (+ $1,000 additional if over 55 years old)
Family – save up to $6,550 (+ $1,000 additional if over 55 years old)
Remember contributions reduce your taxable income and account earnings are tax free!
“Bunch” Itemized Deductions
Prepay your February 2015 property tax installment in December 2014
Prepay your January 2015 mortgage payment by December 2014
Sell “Loser” Stocks
Get rid of those stocks that are worth less now than when you purchased them
Losses will offset other capital gains
You can deduct up to a $3,000 net loss per year
Donate To Charity
You’ve likely poured ice on your head for ALS, so why not continue to help out the charity of your choice!
If you are a “tither” on income as earned, prepay your 2015 tithes by December 2014
Points paid on a previous refinance are fully deductible in the tax year of a new refinance
Rates are still at all-time lows!
Get Deductions For Your Hobby
Hobby-related expenses aren’t directly deductible, unless your hobby can be classified as a business
Business losses reduce other taxable income
Click here for more info on how to turn your hobby into a business
Remember that any reductions in taxable income not only saves you taxes at your top rate bracket, but also helps you avoid phasing out of certain tax credits (i.e. – child tax credit, student loan interest deduction, education credits, etc.).
What tax planning strategies have you implemented in the past to lower your tax liability?
** Each situation should be analyzed individually. Alternative Minimum Tax rules may negate the impact of the strategies mentioned below. Most strategies mentioned help those who itemize deductions.
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