Below Its Property-Tax Assessment?
Has Your Home's Value Fallen Below Its Property-Tax Assessment?
California property taxes are often misunderstood.
A property's tax assessment is not automatically reset each year to its current market value.
Under Proposition 13, a property generally receives a base-year value when it changes ownership or when new construction occurs. That value can generally increase by an inflation factor of no more than 2% per year, unless another reassessment event occurs. Because of this, someone who has owned a Palos Verdes home for many years could have a taxable assessed value far below what the property would sell for today.
So when someone asks me:
"My home isn't worth what it was a few years ago. Can I appeal my property taxes?"
The answer is: possibly—but only in certain circumstances.
When a decline in market value may help
California's Proposition 8 provides a temporary reduction when a property's current market value falls below its Proposition 13 factored base-year value.
For each January 1 lien date, the Assessor generally compares:
1. The property's Proposition 13 factored base-year value, and
2. Its current market value as of January 1.
The lower of the two is generally the taxable value that should be enrolled.
Here's a simple example.
Suppose a homeowner's Proposition 13 factored assessed value is $1,500,000, but comparable sales indicate that the property's market value on January 1 was only $1,350,000.
That homeowner may have grounds to request a temporary decline-in-value reduction.
But consider a longtime homeowner whose Proposition 13 value is only $700,000, while the property is currently worth approximately $2.5 million.
Even if that home might have been worth $2.8 million a year or two ago, its current value is still well above the $700,000 factored assessment. A Proposition 8 decline-in-value reduction generally would not help in that situation.
That distinction is important.
Falling home prices do not automatically mean lower property taxes.
The relevant comparison is generally between the home's January 1 market value and its factored Proposition 13 assessment.
There are other reasons an assessment can be challenged
A decline in value isn't the only possible basis for an appeal.
A homeowner may also believe that the Assessor established an incorrect base-year value following:
a purchase or other change in ownership,
new construction,
a supplemental assessment, or
another reassessment event.
The Los Angeles County appeal form specifically allows taxpayers to raise issues involving decline in value, change in ownership, new construction, calamity reassessments and other assessment questions.
This can become especially important with inherited property.
For example, an inheritance may involve both the fair-market value assigned to the property and entirely separate questions about whether a Proposition 19 parent-child exclusion applies. Those issues should not be treated as interchangeable.
How do you establish the January 1 value?
This is where real estate information becomes very useful.
The State Board of Equalization (“BOE”) says property owners requesting a decline-in-value review typically provide comparable sales that support their opinion of the property's market value.
The most relevant sales are generally those occurring close to January 1, and BOE guidance notes that comparable sales used in the review generally should be no later than March 31.
That means simply finding today's Zestimate or looking at a current listing isn't necessarily enough.
You want to examine things such as:
comparable homes that actually sold,
location and neighborhood,
square footage and lot size,
views,
condition and improvements,
property characteristics, and
how close the sale occurred to the January 1 valuation date.
That is one area where I can help.
I can review the real estate market and comparable sales with a homeowner to help establish a reasonable market-value range. That isn't a County assessment or a formal appraisal, but it can help you decide whether pursuing a review or appeal makes sense.
Start with the Assessor
The State Board of Equalization explains that many county assessors will first review a property's assessment at the owner's request.
The owner may be asked to complete a decline-in-value request and provide comparable sales or other information supporting the January 1 market value.
The Assessor then determines whether the property's market value is actually lower than its factored base-year value.
For Los Angeles County homeowners, the Assessor's online system also references a Decline-in-Value review process, with mailed filing available when necessary.
What if you disagree with the Assessor?
A homeowner can pursue a formal appeal through the Los Angeles County Assessment Appeals Board.
For regular assessments, the Los Angeles County filing period is currently:
July 2 through November 30
For supplemental assessments, adjusted assessments and certain other assessments, different—and often much shorter—deadlines apply. For example, Los Angeles County generally provides a 60-day filing period for supplemental and roll-change/escape assessments based on the mailing date or postmark of the applicable notice or tax bill.
There is currently a $46 nonrefundable filing fee for a Los Angeles County assessment appeal, although a fee-waiver procedure is available for qualifying hardship situations.
Assessment Appeal Application
The current Los Angeles County form is AAB-100 / BOE-305-AH, Assessment Appeal Application. This is the form historically referred to as an application for a "changed assessment."
Download the Los Angeles County Assessment Appeal Application (AAB-100 / BOE-305-AH)
Los Angeles County also allows appeals to be filed online:
File a Los Angeles County Assessment Appeal Online
An important warning: keep paying your property taxes
Filing an appeal does not postpone the property-tax payment deadline.
Property taxes should continue to be paid according to the tax bill while the review or appeal is pending. If a reduction is ultimately granted, the County can process the appropriate adjustment or refund.
Where to learn more
The California State Board of Equalization has an excellent explanation of Proposition 8 decline-in-value assessments:
California BOE — Decline in Value: How It Works
For a broader explanation of the appeal process
California BOE — Assessment Appeals
Los Angeles County also provides filing deadlines, forms and instructions:
Los Angeles County Assessment Appeals Information
Clara's Tip
Don't start by asking, "Are my property taxes high?"
Start by asking:
"What was my property's fair market value on January 1, and how does that compare with my taxable assessed value?"
Those are two very different questions.
Would you like help determining your property's value?
If you're wondering whether your home's market value may be below its taxable assessment, call me for a property-value review (310) 519-7670.
I can help you examine the relevant comparable sales and understand the real estate side of the question. If the situation involves more complicated tax, trust, inheritance or legal issues, I can also introduce you to trusted CPAs, estate/trust attorneys and other professionals as appropriate.
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