05 Oct How Do Property Taxes Work?
As real estate agents we get a lot of questions about property taxes in San Francisco. Below are answers to our most frequently asked property tax questions (by both seasoned home owners and first time buyers alike!).
What Are Property Taxes?
Property taxes are taxes imposed by the local government on property bought or owned by an individual or legal entity. The tax amount is usually based on the value of the property, including land. Property owners can appeal a property appraisal if they believe that it is too high (more on that later). Property values can fluctuate over time, depending on property improvements and/or the value of surrounding properties.
When Do You Pay San Francisco Property Taxes?
Property taxes are charged on a fiscal year beginning July 1st and ending June 30th; hence tax years are referred to as 2019/2020, 2020/2021. Taxes are billed in two equal installments: first installment covers July 1st through December 31st, second installment covers January 1st through June 30th. Tax bills are sent to homeowners in the last week of October. Tax payments are due November 1st and February 1st; tax payments are delinquent on December 10th and April 10th.
How Do Property Tax and Real Estate Tax Differ?
“Property taxes” and “real estate taxes” are often used to mean the same thing, but San Francisco real estate taxes only cover taxes on “real property” like a home, vacation home or rental property, while property taxes can include personal property like vehicles, portable machinery and equipment, office furniture, tools, and supplies.
The California State Board of Equalization defines “real property” as:
- The possession of, claim to, ownership of, or right to the possession of land.
- All mines, minerals, and quarries in the land, all standing timber whether or not belonging to the owner of the land, and all pertinent rights and privileges.
- Improvements—defined as all buildings, structures, fixtures, and fences erected on or affixed to the land, and all fruit, nut bearing, or ornamental trees and vines, not growing naturally, and not exempt from taxation, except date palms under eight years old.
“Personal property” is described as:
- Tangible personal property is any property, except land or improvements, that may be seen, weighed, measured, felt, or touched, or which is in any other manner perceptible to the senses.
How to Calculate SF Property Taxes
In most cases, the assessed valuation in your first year of ownership will be the same as the purchase price.
- The real property tax due for any property can be calculated by multiplying the assessed value of the property by the real property tax rate for the county in which the property is located.
- It may be increased by up to 2% per year for each year you own the property.
- If you own and occupy a dwelling on March 1st as your principal place of residence, you are eligible to receive a reduction of up to $7,000 of the dwelling’s taxable value. To receive this exemption, you must file a claim with the Assessor.
- Once you receive the exemption, it is not necessary to file each year as long as you own and occupy the residence.
Taxes On Newly Purchased Properties
Escrow prorates taxes, but the actual taxes may not have been paid, and you are responsible for any unpaid taxes at escrow closing. Read your escrow papers to determine if any portion of annual taxes were paid by the previous owner prior to closing. The Tax Collector will not send a bill for the remainder of the year in which you acquired the property unless requested. If any taxes remain unpaid, call the Tax Collector and request a bill; have the Assessor’s Identification Number before calling.
Mello-Roos Community Facility Districts
Mello-Roos districts are designated areas which have issued bonds for community facilities, for example, earthquake retrofitting of schools, and for which annual tax levies are collected as part of the property tax billing. There are two districts in San Francisco. One encompasses the entire City and the other is a small area South of Market. The cost for the Mello- Roos Community Facility Bonds in most parts of San Francisco is $39.04 for a single family residence.
Upon change of ownership, the Assessor’s Office will reappraise the property and will bill the new owners for any difference in taxes resulting from a higher assessed value. The Assessor will issue you a supplemental assessment bill which is prorated based on the number of months remaining in the fiscal year ending June 30th. More information about reassessments can be found below.
California Real Property Tax Reassessment
Real property is reassessed upon change of ownership and, in certain circumstances, the construction of improvements. The new assessed value is equivalent to the purchase price and is subject to being increased by as much as two percent each year.
Under Proposition 13, passed by California voters in 1976, the ad valorem tax rate is set at one percent of the full cash (or assessed) value of real property. This limitation, however, does not apply to special assessments levied for the purpose of paying the interest and redemption charges on bonded indebtedness approved by county voters. The assessed value of real property is subject to being increased by as much as two percent each year, or by a larger amount upon change of ownership.
Buyers should be aware that the assessed value of real property is adjusted upon change of ownership to an amount that is presumed by law to be equal to the purchase price of the property. However, that presumption may be rebutted by the tax assessor and a higher value assessed where the assessor can establish the higher value by a preponderance of the evidence using accepted methods of valuation. Also, under certain circumstances, the construction of new improvements to an existing property can trigger an adjustment to the assessed value of the property.
Like we mentioned above, the real property tax due for any property can be calculated by multiplying the assessed value of the property by the real property tax rate for the county in which the property is located. The San Francisco property tax rate for fiscal year 2019-20 is 1.188 percent — but note that it may change year to year. You can view and print your current property tax statements or view past payment history by visiting the Property Tax Payment Portal.
After change of ownership, a supplemental tax bill may be issued to collect taxes owing for the current tax year based on the difference between the previous and the new assessed values of the real property. The seller is responsible for the payment of taxes due prior to close of escrow and the buyer is responsible for the payment of taxes due after close of escrow, including any supplemental tax bill(s).
Since the assessed value of real property cannot exceed the fair market value, State law provides a way to challenge the assessed value when the market value declines. For questions regarding ad valorem taxes, buyers and sellers should contact the county assessor’s office at 415-554-5596, visit the assessor’s office website, and/or discuss the situation with a qualified real estate or tax attorney or certified public accountant.
Can You Dispute Your Assessment Amount?
You may apply to the Assessor to see if that office will change the valuation. This is typically called an Informal Review. Additionally, Appeals Boards have been established for the purpose of resolving valuation problems. Appeals on regular assessments may be filed between July 2nd and September 15th. Appeals on corrected assessments, escaped assessments (those that did not take place when they should have), or supplemental assessments must be filed no later than 60 days from the mailing date of the revised tax bill. If you choose to appeal, pay your tax installments in full by the deadlines or you may incur penalties. If the appeal is granted, a refund will be issued to you.
Some of the information above is quoted from the General Information for Buyers and Sellers outline published by the San Francisco Association of Realtors (Revise date 11/12).
Feel free to connect us to anyone you know who has questions about real estate in general. If we can’t help them, we know someone who can. Call us at 415-735-5867 for a no-obligation consultation. You can also email us at firstname.lastname@example.org.
What should I expect to pay in property tax?