Every week, Mansion Global poses a tax question to real estate tax attorneys. Here is this week’s question.
Q: I'm looking into buying a new condo in Downtown Los Angeles. I'm considering two units on different floors. Will the property tax be the same for both?
A: Although a penthouse will probably run you more than a two-bedroom on the first level, what floor it’s on isn’t what will affect your tax rate.
"It’s based on your purchase price," said Matthew Burke, principal of his eponymous law practice in Los Angeles. "It makes no difference what floor it’s on, just what you paid for it."
The state of California charges 1% of the assessed value of the condo or home, said Steffi Gascón Hafen, a tax attorney at Snell & Wilmer. After that, property tax can increase for inflation, but not more than 2% a year, Ms. Hafen added.
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That's because of California’s Proposition 13, passed in 1978, which caps the increase in the base value of a home at 2%. The property is assessed at acquisition date. Each year thereafter it can increase for inflation, but not more than 2%, Ms. Hafen said.
That can give people an incentive to keep properties for a long time. For example, someone who bought a bungalow in 1950 for $20,000 would pay much less in property taxes than someone who bought a place next door more recently and, presumably, for a lot more money. Because the property tax on the home bought in 1950 is based on the assessed value at acquisition date, that homeowner will be paying a lot less in taxes, she said.
Around L.A. county, each town is allowed to collect property taxes to fund special initiatives. That could push rates up to 1.1% or even 1.7%, depending on where you live, she said.
Proposition 13 also gives Californians a sense of certainty as far as how much they pay, Mr. Burke said.
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"When they buy, they know as long as they live there, they can predict the property tax because it can only go up 2% a year," he said.
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