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Prop. 8 Can Help Palm Springs & Riverside County Homeowners Reduce Property Tax Bill

Every Wednesday morning, the Palm Springs Association of Realtors has its weekly Board meeting at the Mizell Senior Center at 8am.

I always get to the meeting about 15 minutes early to get a good seat.  When I got there this morning, the meeting room was packed.  There was a TV news crew setting up in the corner, and was wandering what all the hoopla was all about. 

Were were having a special guest speaker?  Who was it?  The Mayor?   The Governator?  My curiosity had piqued.  It turns our speaker was Larry Ward, the Riverside County Tax Assessor.  Now I thinking to myself “Why all the fuss?  Death & Taxes are the only things certain in life.”

I know that sounds a little pessimistic so early in the morning, but I did not have my morning cup of coffee yet.  The topic that Mr. Ward was covering today was on Proposition 8, the amendment clause in California’s Prop. 13 law to reduce property taxes when homes have decreased in value.

Proposition 8, passed in November 1978, amended Proposition 13 to reflect declines in property values. As a result, Revenue and Taxation Code Section 51 requires the County Assessor to annually enroll either a property’s factored Proposition 13 base year value or its Market Value as of January 1 (lien date), taking into account any factors causing a decline in value, whichever is less.

Mr. Ward went on to explain that in Riverside County, 15,000 Notice of Defaults on homes have been issued in the first 3 months of this year and that foreclosures are up 171% over last year.  With property values down and the current state of the economy, the County Assessors office wants to be proactive in order to help homeowners relieve some of their financial burden.

How will this help the homeowners of Palm Springs & rest of California?  The County Assessor is focusing on people who purchased their homes from January 1, 2004 to the present.   This timeframe represents the height of the Real Estate boom and all of the buying frenzy that ensued.  Take a look at the chart to illustrate how Prop. 8 would work.

 

 

 

 

 

 

 

 

 

 

 

If you purchased your home for $400,000 in 2004 (Year 1),  Prop. 13  allows for for a maximum of 2% a year increase in your tax basis .  

In year 2, your property value increased to $455,000, but your Prop. 13 basis is only $408,000.

But in years 3 & 4, the property values plummet but you are still paying the higher basis.

 By filing a Decline in Value Reassessment application, you can petition the County Assessors Office to reassess the value of your home.  If you look at Year 3 Prop. 13 Market Values, the basis is $416,000, which represents $5200 per year in property tax.  By filing a Prop 8 reassessment and bring your basis down to $365,000, the new property tax would only be $4563.  This represents a savings of nearly $700 per year!!!

Prop. 8 allows an annual reassessment increases (or decreases) based on current market data.  You need to realize that Proposition 8 reductions are temporary and recognizes the fact that the current market value of your home has fallen below its Proposition 13 base year value.

If and when the market value of the previously reduced assessment (Proposition 8) increases above its Proposition 13 factored base year value, the Assessor will once again enroll its Proposition 13 factored base year value. Proposition 8 values can change from year to year as the real estate market fluctuates up and down.

Any property that has received a Proposition 8 reduction in the prior year will be automatically reviewed the next year to determine whether that year’s lien date value should be maintained, decreased, or increased. Unless there is a change in ownership or new construction, your assessment can never increase above the factored Proposition 13 base year value.

The due date to file the Decline in Value Reassessment application is September 1, 2008.  For more information on Riverside County Proposition 8 data, log on to http://www.RiversideACR.com

In these tough economic times, any money saving ideas can help us all.

 

 

 

 

 

 

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