How Are Property Taxes Determined?
So how are property taxes determined when you buy a piece of property? Here in the state of California, obviously property is very expensive most of the time. And your property taxes are going to be determined based on the purchase price of the home. Once you purchase the property, the tax, if your property appreciates, let’s say you paid a million dollars for the property and it appreciates to 1. 5 million dollars, your property taxes won’t go up to 1. 5 million dollars. They will stay at a tax basis of close to a million dollars. Every year, it’s possible that the tax will go very minimally, but they do not go up significantly to reflect what the appreciated value is of the property. So keep that in mind when you buy a property.
Really, with Proposition 13 here in the state of California, you’re locked in pretty close to what you pay for the property even if you’ve stayed on the property for 20 years. For example, If you buy a house in Oakland and you pay 1. 5 million dollars and the people next to you have been living in the property for say 20, 25 years and they paid 50,000, their tax basis is closer to the 50,000 and yours is close to the 1. 5 million dollars. You have a significant difference in what your annual property taxes are between the two properties just because of what you paid for the property.
