Every week, Mansion Global poses a tax question to real estate tax attorneys. Here is this week’s question.
Q: I am debating between buying a newly built home versus one that’s nearly 40 years old in Los Angeles. They sit on roughly the same size lot. Would the property taxes be different?
“What drives the property tax bill is the fair market value of the home purchased,” said Gary Q. Michel, partner and chair of the tax department at Ervin Cohen & Jessup law firm in Beverly Hills, California. If the homes are bought for the same price, then the property taxes on each house would be the same, he said. “It is irrelevant that one home is newer than the other.”
Matthew F. Burke, principal of his eponymous law practice in Los Angeles, added that “the lot size has no bearing” on property taxes.
But, Mr. Burke said, you should keep in mind two things regarding which house you buy: bond measures and renovations. Each property tax bill has additional amounts for local bond measures, which are based on the home’s assessed value and cover things like infrastructure, Mr. Burke said. Common total rates (the basic rate of 1%plus the local bond rates) typically range between 1.17% and 1.22% in California, he said.
“In general, we don’t see a significant difference between neighborhoods, and the differential is certainly not enough to consider one home over another,” Mr. Burke said.
The second consideration is whether you’ll be doing significant work on the older home. Upgrades and modernizations wouldn’t count, but major work such as an increase of square footage could be considered assessable “new construction,” he said. If so, the added value would be tacked on to your home’s total assessed value.
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