Property Tax is Boring. Read This Anyway.

I’m not just your real estate agent, I’m your real estate advisor. I want you to have the freedom to make informed choices throughout your entire real estate experience: when you buy a home, while you live in it, and when you sell it.

Almost everyone thinks that since real estate property tax is inevitable, there’s no good reason to understand how it’s calculated. I believe the opposite: Your property tax bill is too high NOT to understand it! For most San Diego County homeowners, real estate property tax bills are thousands of dollars each year, and they usually increase with every year of homeownership. If your property is subject to Mello-Roos, also known as Community Facilities District (CFD) fees, then your property tax bill is even higher.

Here is how to read your property tax bill. I promise to try to make this painless.

You can also download my Property Tax Calculation Worksheet. It helps you calculate your current tax liability, and also estimates your tax liability for future years.

Here’s how property tax is calculated, how property tax usually increases (and might sometimes decrease) each year, how property tax is billed, and what happens when you buy or sell real estate. I also include links to websites where you can look up individual property tax bills and information about special assessments.

Would you like a personalized explanation of California Property Tax?

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How Property Tax is Calculated

When you look at your property tax bill, it can seem confusing. There might be dozens of separate charges listed as “Your Tax Distribution,” without much explanation of what they mean.

San Diego Real Estate tax is “ad valorem,” Latin for “according to value.” The value of your home is assessed by the San Diego County Assessor’s Office. The higher your home’s assessed value, the more taxes you pay. The base tax rate used to calculate your bill is 1% of the net value, plus any voter-approved bonds. There are also fixed charge assessments, that are not related to your property’s value.

Annual Property Tax is calculated three ways:

  • 1% of property’s NET assessed value
  • additional % of value, from voter-approved bonds
  • fixed charge assessments

Net Value of Your Home – Proposition 13 and Property Tax Exemptions

Your base tax rate, and annual increases to the net value of your home, are calculated according to the rules set by Proposition 13. You may also qualify for up to one property tax exemption per property.

You are eligible for a $7000 Homeowner’s Exemption, if the property is your principal place of residence. The Disabled Veterans’ Property Tax Exemption is available for veterans with a 100% disability rating.

Proposition 13

Proposition 13 was passed in 1978. It limits your base tax rate to 1%, and it also limits the annual increase to your home’s assessed value, which is used to calculate property tax. When you buy a house, the purchase price becomes the new assessed value. In accordance with Proposition 13, you pay 1% of this assessed value each year as property tax.  The benefit of Proposition 13 is that as time goes by, the assessed value does not increase as market values increase.  The annual increase of your property’s assessed value is limited to 2% per year, based on the California Consumer Price Index. This makes it possible to anticipate the amount of future property tax bills.

Homeowner’s Exemption

If your property is your primary place of residence, you are eligible for a Homeowner’s Exemption of $7,000.  Your assessed value is lowered by $7,000 if your property is owner-occupied. If you buy a house that you will occupy as your primary place of residence, be sure to apply for this exemption by February 15. You only need to apply for the Homeowner’s Exemption once, when you first move in. The County automatically mails a Homeowner’s Exemption application whenever a residence is sold. You can also go to the HOX-Form page on the County Recorder website and download an application. You can also just print out a copy to mail in.

Disabled Veterans’ Property Tax Exemption

Military veterans, or their unmarried surviving spouses, may be eligible for the Disabled Veterans’ Property Tax Exemption for their principal residence. This exemption is reserved for veterans who, because of injury or disease incurred in military service, are blind in both eyes, have lost the use of two or more limbs, or are totally disabled. Totally disabled means that the United States Veterans Administration or the military service from which discharged has rated the disability at 100% or has rated the disability compensation at 100% by reason of being unable to secure or follow a substantially gainful occupation.

This exemption is also available to any unmarried surviving spouse of a person who, as a result of service-connected injury or disease, died while on active duty in the military service or after being honorably discharged.

There are two levels for the Disabled Veterans’ Property Tax Exemption: Basic and Low-Income. Both are adjusted annually for inflation. In San Diego County, the Basic Exemption for 2017 is $130,841, and the Low-Income Exemption is $196,262. To qualify for the Low-Income Exemption, the Household Income Limit is $58,754.

You only need to file for the Basic Exemption once, when you first move in. For the Low-Income Exemption, you need to file annually, before February 15 of each year. If you miss that deadline, but file before 5 pm on December 10 of that year, you are eligible for 90% of that exemption.

You are also allowed to file retroactively and get a refund for previous years, going back as far as eight years. Late filings will grant you 85% of the exemption. For example, if  you were eligible for a $100,000 exemption back in 2010, you can file now and receive a refund based on an $85,000 exemption.

Here are links to more information. You can also call the San Diego County Assessor’s Office at (619) 531-5773.

Voter-Approved Bonds

Voter-approved bonds can increase the 1% base rate, such as bonds providing funding for schools, parks, or other community services. Combined with the 1% base rate, most property tax rates in San Diego County are somewhere between 1.02% and 1.19%. The individual bonds are listed out on your property tax bill.  You can also find this information online. The San Diego County Office of Property Tax Services provides a Tax Rate by Tax Area Search, and also a list of typical tax rates for each city in the County.

Fixed Charge Assessments

In addition to the tax calculated from your home’s value, your property tax bill may include fixed charge assessments. These can be voter-approved assessments or County services, and they can also be Mello-Roos, otherwise known as Community Facilities District (CFD) fees. In some areas of San Diego County, a utility like sewer service, is charged to the homeowner’s property tax bill as a fixed charge assessment. These fixed charge assessments are unaffected by your property’s value. At the same time, some of these charges increase annually.

How Property Tax Increases Each Year

According to Proposition 13, the assessed value of real estate may increase a maximum of 2% each year. This increases the amount calculated from your tax rate. (See the example below.) Your tax rate can also increase with new voter-approved bonds. Also, some fixed charge assessments are subject to annual increases.

Even though Proposition 13 limits the annual assessed value increase to 2%, a tax bills can show a much larger increase in assessed value from the previous year. Read the next section to learn more about why and how his happens.

Can My Property Tax Bill Ever Decrease?

Yes. If you believe that your property’s value has gone down, you may be able to lower your tax bill.

Every year, between July 2 and December 1, you can appeal to the San Diego County Assessment Appeals Board to have your property reassessed. This reassessment will apply to that current fiscal year, which runs from July 1 through June 30.  If the County Assessor reassesses your home at a lower value, this will lower the portion of your tax bill that is calculated by your tax rate. The fixed charge assessments will not change.

If you successfully have your property reassessed at a lower value, keep in mind that when property values go back up, your home’s assessed value will also go back up, along with your tax bill.

If you receive a tax bill that shows an increase in assessed value from one year to the next that exceeds 2%, this is likely the reason. The Assessor grants temporary reductions in value when market values increase. When the market values go back up, the Assessor can increase the assessed value by a maximum of 2% for each year of the reduction. In accordance with Proposition 13, the increase in assessed value can never exceed 2% for each year of ownership.

For Seniors Only – California Property Tax Postponement Program

Property tax deferral is back in California! Seniors who meet the following requirements may qualify for property tax postponement:

  • Be at least 62, or blind, or have a disability
  • Own and occupy the home as your primary place of residence
  • Have a total household income of $35,500 or less
  • Have at least 40% equity in the property

If you qualify for property tax postponement, you will accrue 7% interest for the amount postponed. For example, for every $1000 of taxes postponed, you will be charged $70 per year. The balance becomes due when you do one of the following:

  • Move or sell the property
  • Transfer title
  • Default on a senior lien
  • Refinance
  • Die
  • Chooses to obtain a reverse mortgage

For more information about the California Property Tax Postponement Program, contact the California State Controller at (800) 952-5661 or postponement@sco.ca.gov. More information is available at the Controller’s  Property Tax Postponement website.

Property Tax Billing Schedule

The fiscal year for property tax bills is July 1 through June 30 of each year. Your bill will show the annual property tax amount due. They are paid for in two equal installments twice per year. The first installment, which covers July 1 through December 31,  is due on November 1, and late after December 10. The second installment, which covers January 1 through June 30, is due on February 1, and late after April 10.

Property Tax Billing Example

Let’s say you bought a house in July 2016 for $400,000.  Upon purchase, the assessed value is updated to the purchase price of $400,000. Because this house is your primary residence, you qualify for the $7,000 Homeowner’s Exemption, which lowers the taxable value down to $393,000.

Property Tax Bill, Fiscal Year 2016-2017 – Covers July 1, 2016 through June 30, 2017

Your base tax rate calculation: 1.025%

Proposition 13: 1%, plus the following Voter-Approved Bonds:

  • Proposition A: .005
  • Proposition B: .017
  • Proposition C: .003

Total tax rate: 1.025 x $393,000 taxable value = $4,028.25

Fixed charge assessments: $31.00 total

  • Water Standby Charge: $11.50
  • Water Availability: $10.00
  • Mosquito Surveillance: $3.00
  • Vector Disease Control: $6.50

Total Annual Property Tax: $4,028.25 +$31.00 = $4,059.25

The first installment of your bill, $2,029.62, covers July 1, 2016 through December 31, 2016, and is due November 1, and no later than December 10, 2016.

The second installment of your bill, $2,029.62, covers January 1, 2017 through June 30, 2017, and is due February 1, and no later than April 10, 2017.

Next Year: your property’s assessed value will increase by 2%, from $400,000 to $408,000. With the Homeowner’s Exemption, your taxable value will be $401,000.

The Following Year: your property’s assessed value will again increase by 2%, from $408,000 to $416,160. With the Homeowner’s Exemption, your taxable value will be $409,160.

Property Tax Payments When You Buy or Sell Real Estate

When you buy or sell real estate, property tax may either be credited to you, or you may need to pay a credit. It usually depends on the date of the purchase or sale.

If you are over 55, you may qualify for a reappraisal exclusion for your the next home you buy. For more information, go to the California State Board of Equalization’s website.

When You Buy Property

When you buy real estate, the escrow officer will calculate any tax credit or liability. For example, the first installment of property tax, for July through December, is not usually paid until December 10.  This means that if you buy a house in September, the seller hasn’t yet paid property tax from July 1.  If escrow closes on September 15, the seller will credit you for property tax, pro-rated from July 1 through September 14.  The property tax bill you pay by December 10 will cover all of July through December.

On the other hand, if you buy a house on May 15, you will owe the sellers for property tax, because they have already paid the second installment that covers January through June, which is due by April 10. You will credit the sellers for the property tax that they already paid, pro-rated from May 15 through June 30.

If Your Close of Escrow Date is just before a Tax Due Date

If you are buying a house, and the expected close of escrow date is just before a tax due date, the escrow officer may have you pay for the next installment right out of escrow funds. This is to ensure that the tax bill is paid on time, and avoid any late charges for you. If you have any questions about this, ask your escrow officer.

Supplemental Tax Bill

ATTENTION BUYERS! When you buy a house, in addition to the Homeowner’s Exemption application, you should always look for a Supplemental Tax Bill in the mail. This is the additional bill that reflects the change in the assessed value of real property, to match the purchase price you paid for it. It can take up to a year for the Assessor’s Office to update the correct assessed value, so you may receive Supplemental Tax Bills for two fiscal years!

Even if you contribute to an impound account that pays your tax bills for you, the Supplemental Tax Bill is not sent to your mortgage company. Do not expect your lender to pay the Supplemental Tax Bill. They are generated and mailed throughout the year, and must be paid in addition to the secured tax bill by the stated due dates. The County of San Diego Assessor’s Office provides an online Supplemental Tax Calculator to estimate your bill.

For more information about buyer closing costs, you can also read about the costs to buy a house.

When You Sell Property

When you sell real estate, the escrow officer will pay off any outstanding property tax bills, and calculate any credits or debits to the buyer. For example, if you sell your house on February 15, you probably haven’t paid the second installment that covers January through June.  The buyers of your house will need to pay this bill by April 10, so you will need to credit them for your property tax, pro-rated from January 1 through February 14.

On the other hand, if you sell your house on May 15, and you have already paid the second installment that covers January through June, then your buyer will credit you for property tax, pro-rated from May 15 through June 30.

You can also read about the costs to sell a house, and how I prepare your home to be listed in the MLS.

Property Tax Lookup

You can look up the property tax bill for any property in San Diego County. You can search and pay for property tax bills on the San Diego County Treasurer-Tax Collector website. If you are occupying your home, but you don’t see the $7,000 homeowner exemption on your bill, go the HOX Form page at the County Recorder’s Office to fill out and submit the homeowner exemption application. You can also just print out a copy to mail in.

You can look up special assessment information on the San Diego County Office of Property Tax Services website. This resource provides Secured Tax Parcel information, such as assessed valuation, tax rates, and a breakdown of all special assessments, including Mello-Roos, or Community Facilities District (CFD) fees.

If you’re having trouble looking up your home by address, and can’t find the Assessor’s Parcel Number, send me a message and I can help you ASAP.

The Bottom Line

Property taxes are a substantial portion of a homeowner’s total monthly housing payment. Be an informed consumer. Understand your property tax bill, and remember to apply to the Assessment Appeals Board if you believe your assessed value is too high.

You can also download my Property Tax Calculation Worksheet. It helps you calculate your current tax liability, and also estimates your tax liability for future years.

One last thing… Pay your property tax bill on time! If you pay even one day late, you will have to pay a 10% penalty, plus a $10 fee. If your payment is not received for either the first and/or second installments by June 30th, the property becomes “tax defaulted.” Penalties begin to accrue on July 1st, an 18% annual interest rate (1.5% per month), and a $33 redemption fee is added to the bill.

Contact me if you have any questions about property taxes or other real estate expenses.

Mylene
Mylene Merlo is a licensed REALTOR® with Allison James Estates & Homes in Carlsbad, California. As a Carlsbad Real Estate Agent, I specialize in residential North County San Diego real estate. If you have any questions about real estate in Carlsbad, Cardiff-by-the-Sea, Encinitas, Escondido, Oceanside, San Marcos, Solana Beach, or Vista, call or text me at (760) 637-7231 or send me a message.

6 thoughts on “Property Tax Calculation – San Diego Real Estate

  1. When a home is bought or sold, why are the fees for services (like realtors service fees) included in the value and therefore part of the value. Such amounts do not contribute to the physical asset’s true value….so why do transaction closing costs get rolled into the property value and then taxed forever?

    1. Hello Wayne, the general consensus is that property taxes are usually deductible from income taxes, but I defer to your tax professional for the final answer. Send your property tax bill to your tax professional, who can advise you regarding tax deductibility. Thanks for checking out my website!

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