Real Estate Taxes: How Do Californians Fare?

tax.jpgIn addition to the big-ticket prices that people in the Bay Area pay for homes, there is the big-ticket property tax that has to be paid. Thanks to Proposition 13 (which coincidentally kept me from getting a county job back in 1980), taxes remain fairly stable throughout the duration of ownership of a home. The tax rate limited by Prop 13 is a max of 1.2% of the home’s assessed value, plus any special city, county or state assessments, with increases not to exceed more than 2% per year. This is good news for your grandparents and parents, and you, if you have owned the home for a significant period of time. But for new homeowners, it can be a big shock. There is a general tax levy of 1%, but each county has its own additional taxes. For example in San Mateo County the annual property tax is 1.06% and in San Francisco it is 1.141%. How do California property taxes fare against the rest of the United States?

Unlike California, 37 states have state property taxes in addition to whatever the local jurisdiction (city or county) charges. That means higher property taxes for those particular states. Overall, it sucks to live in New Hampshire, Connecticut, New York and Massachusetts, as these states have the highest taxes based on Census Bureau information. States like New Hampshire do not have taxes on wages, choosing to obtain 43% of state funds from homeowners. On the other end of the spectrum are southern states, such as Arkansas, Mississippi, West Virginia, Alabama and Louisiana. According to the “Residential Real Estate Tax Rates in the American Community Survey” authored by Natalia Siniavskaia, Ph.D. and published on HousingEconomics.com, the three states with the most expensive homes (California, Hawaii, and D.C) have some of the lowest property tax rates in the nation.

If you live in California, the average property tax rate is $4.77 per $1000 of value. It took me awhile to reconcile this with the above referenced rate of 1.06%. But it is based on home values now and taxes collected now. For example, if you bought a house in 1995 for $315,000, you would currently be paying about $4000/year in taxes. That house is now worth approximately $1,000,000, but you aren’t paying 1.06% on that value. Because of Prop 13, you are only paying .4% or about $4 per $1000 of value. People who have been in their home for 30 years may only be paying $1-2 per $1000 of value, while today’s buyers are paying $10.60 per $1000, averaging out to that $4.77 I mention above. (Hope I got that right!)

So it appears, that while our home prices are still exorbitant by most state’s standards, our tax rate is within reason. Chalk one up for California…..

  • dnb

    This makes no sense. The property tax rate is computed on the purchase price. If property values go up you will always be paying less than the nominal rate of $1 or $2 per thousand. It is only if property values went down that you could be a higher rate; however if the value went down you could get the county assessor to reappraise the property which would cause the actual rate to go back down.