“I’ve never bought a home before. How do property taxes work? How are they determine how can they change?”
Your annual property tax will be a certain percentage of the assessed value.
In San Diego County, it’s 1% + some add-ons which bring it to between 1.1% and 1.2%.
When you buy a home, it’s assessed at the price you paid. HOWEVER, if the assessor feels you underpaid by quite a bit (I don’t know if they have a formula for this), they can assess it at what they feel the market value was when you bought it.
If you do any improvements to the home, such as a room addition, the county will increase the assessment by how much they feel the value was increased.
Other than that, under California’s Proposition 13 passed in 1978, the county may only increase your assessment by 2% per year.
So using those numbers, if you buy a home for $500,000:
- Your home should be assessed for $500,000.
- Your first year tax bill should be about $6,000.
- Your tax bill next year should be no more than $6,120.
While that’s technically correct, there is a confusing process that happens when you buy a home.
The tax assessor takes months to process that you now own the home and reassess it.
The effect is that you keep paying taxes at the assessed value of the previous owner, be it higher or lower than what it should be.
Then when the county catches up, they will send you a new “supplemental tax bill” to bill you for the months that you were paying the owner’s old tax rate when you should have been paying your new tax amount.
In the rare cases where you were overpaying (because the seller’s assessment was higher than what you paid), you will actually get a check or credit from the tax assessor.
There, that was easy. Not.