Los Angeles Property Taxes
Are property taxes a deciding factor in where to buy a home in Los Angeles? For many people, it would not be practical to make property tax a major deciding factor or else everyone would move to a much different LA - Louisiana - where the property taxes are the lowest in the nation. Assuming you are not moving to another state because of their low property taxes, let's discuss Los Angeles property tax plus a few examples and comparisons from Westside communities.
When buying property, many buyers chose an area based on convenience to their work and social activities, good school district, lifestyle, and/or affordability. Part of considering what a buyer can afford is knowing how much the property tax is going to cost, but more as a part of the total expected monthly costs of homeownership rather than the tax on its own.
What is Property Tax?
Property tax is a levy on property that the property owner is required to pay. Property tax can vary within each state, and within each state the taxes can vary within each county, and within each county the taxes can vary within each city. Within Los Angeles County exist 88 cities and city property tax rates may include additional assessments for schools or special services.
Property tax is paid in two installments over the fiscal year. For homeowners with a mortgage, a lender or loan servicer can estimate the amounts due for a buyer who can then pay 1/12 of the estimated portion each month.
The standard throughout the state of California is for all property owners to pay a general property tax equal to 1% of the property's value, along with special or direct assessments levied by their municipalities. In Los Angeles County, the average residents pay for these combined property taxes is 1.16%, or $11.60 for every $1,000 of assessed value. See below for a comparison of assessed property tax (a combination of state and local taxes) on the Westside of Los Angeles (in ascending order):
- Culver City - 1.061782%
- Beverly Hills - 1.087422%
- Malibu - 1.102020%
- Santa Monica - 1.113924%
- West Hollywood - 1.179221%
- Los Angeles - 1.220441%
These percentages are based on the highest tax rate for the assessed value of homes in each city. It does not account for direct assessments for services such as lighting, sewage, refuse, and others charged by cities. Thanks to proposition 13, the maximum amount of tax on real estate is limited to 1% of the full cash value (a.k.a. fair market value) and cannot increase more than 2% over the previous year. The assessed value is adjusted in the tax rolls once a home sells, adjusting to the purchase price. Remodeling a home can also trigger a reassessment. Homeowners who add another bathroom, install a central heating, ventilation, and air-conditioning system, or otherwise significantly improve their home can be subject to a reassessment and higher property taxes every year thereafter as a direct result of such improvements.
Back to the original question: Is Los Angeles property tax a deciding factor in where to buy a home?
Imagine three homes located near Beverly Grove similar is every detail and priced $1,000,000. One home is in Beverly Hills, another in West Hollywood, and the third in Los Angeles. Their respective annual property taxes would be $10,874.22 in Beverly Hills, $11,792.21 in West Hollywood, and $12,204.41 in Los Angeles.
After the course of five years (assuming the assessments do not change because math is hard), the home affected by Los Angeles property tax will cost $2061.00 more than the home for sale in West Hollywood and $6650.95 more than the home for sale in Beverly Hills. Is it significant? Maybe not at first, but it can add up and help make a difficult decision a little easier. If all things are equal, which we know is never the case in real estate, an extra $6650.95 over the course of five years would be a great bonus.
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