If you know what Proposition 8 is and you purchased a home in California anytime in the mid to late 1980s, you may have already reduced your property tax liability. If you don't know what Proposition 8 is, you may be spending money unnecessarily. To find out if you can save some money, it may be worthwhile to do some research. In summary, California State Proposition 8 states that if the actual current market value is less than the assessment, the Assessor's Office may reduce the assessed value on any real property. And if there is a reduction in the assessed value, there will be a reduction of your property taxes.
You may have received mailed solicitations from companies or individuals encouraging you to engage their services to help you reduce your property taxes. What they offer to do for you, you can do for yourself. Let's make some assumptions. Let's assume you purchased your home in 1989 for $300,000. Based on Proposition 13, your property tax will be 1% of the purchase price. For argument sake, let's use the 1% general tax levy though your taxes will be higher based on other assessments (fire, sewer etc.).
Based on a $300,000 purchase price, your taxes will be $3,000 for the first tax year. Your taxes will increase by an allowable 2% per year. Now let's fast forward to 1997. You are in receipt of your current tax bill. You are paying your property taxes based on the initial purchase price of $300,000 with annual increases added on for the past eight years. What has happened to property values during the previous six years in Southern California? They have gone down. So today, you are paying property taxes adjusted annually on a $300,000 base, when the property may have a market value of $240,000-250,000. You are overpaying property taxes to the tune of $600-700 or more per year.
You may have noticed that the County of Los Angeles does not send a letter informing you that there has been a decline in your property's value when it sends out the property tax bill. There is no automatic mechanism in place to reassess property, unless title transfers through a sale, building permits are issued or there is another material change in title. So, how do you go about requesting a reassessment of your property's value? The Office of the Assessor for the County of Los Angeles has a form called Application for "Decline-in-Value" Reassessment (Prop. 8) which you must complete and file with the Assessor's Office by the cutoff date of March 15.
Any filings after the March 15 date will not be processed. On this form you will enter your opinion of value for your home. This estimate is based on closed sales of comparable homes within your area. The closed sales must be no more than 90 days after the lien date. The lien date is January 1 of each year. You may use closed sales before the lien date. The Assessor's office asks you to supply information about the comparable sales you are using to justify your request for a reassessment of your property, i.e., address, sale date, price and description of the property.
With your timely application submitted, the Assessor's Office should respond to your request by August 15. If there is acceptance of your opinion of value, your assessed value will be lowered. What happens if the principal appraiser says, "No"? You do have the right to an appeal.
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