Possible Real Estate Tax Change
As we all know, real estate owners pay a tax on the property they own. The tax is based on the market value of the property, which is generally set based on the latest sale price of the property. Historically, the County Assessor could increase the valuation as general market values increased. With rapid increases in property values in the 1970s, California voters approved Proposition 13 which limits the reassessment to the most recent sale price with a maximum increase in the assessed value of 2% each year. Therefore, property taxes are really only based on the current market value when the property is sold regardless of how long ago the sale occurred.
As the cost of living increased over time, cities and school districts complained that the current real estate tax system creates a financial hardship and requested a change in the law without much political support. As recent as 2014, then Governor Jerry Brown called Proposition 13 “a sacred doctrine that should never be questioned.” This “sacred doctrine” is about to be challenged. Toward the end of 2018, the California League of Women Voters successfully qualified a proposition for the 2020 election to alter Proposition 13 and the real estate tax code. Learn more about this proposal and Proposition 13 in this article from the LA Times.
The primary aspect of the proposition permits real estate to be reassessed to market value every three years. The proposition would not change the tax code for residential properties, including single family homes and condominiums. There is no indication if apartment buildings would be subject to the change in the law. The proposition would change the tax code for office buildings, retail centers and industrial buildings. This would result in substantial increases in real estate taxes for most of the commercial and industrial property owners. Small businesses with less than 50 employees that own the property the company occupies would also be exempted from the change.
This proposed real estate tax law change could affect all of us. Property owners charge rents to cover all of the operating expenses, including real estate taxes. Even leases for several years on commercial and industrial properties have provisions that allow the property owner to collect more rent during the lease term to cover real estate tax increases. The new increases either have to be absorbed by the tenant or passed on to their customers, which could affect all of us. If retailers pass the tax increase on to us, look for increased costs at the pizza parlor, hair stylist, supermarket, pharmacy and movie theater. Increased office costs could be passed on by doctors, dentists, and attorneys, just to name a few.
We will have almost two years to analyze and discuss this proposition. The important thing is to conduct your own review and be an informed voter.
Regardless of if this proposition becomes law or not, one thing stands out—the cost of living in San Diego requires careful monitoring and controlling of your expenses. You need a financial institution that has your best interest in mind and can help you achieve financial independence. You need Mission Fed. Contact us at any of our more than 30 local branches, online or by phone at 800.500.6328.
The content provided in this blog consists of the opinions and ideas of the author alone and should be used for informational purposes only. Mission Federal Credit Union disclaims any liability for decisions you make based on the information provided. References to any specific commercial products, processes, or services, or the use of any trade, firm, or corporation name in this article by Mission Federal Credit Union is for the information and convenience of its readers and does not constitute endorsement, control or warranty by Mission Federal Credit Union.
More Blog Posts
6 Tips to Be More Financially Savvy in 2016
Managing your money better can be as easy as a few practical pointers. Mission Fed 1st VP Branch Network Operations Jeanine Dodman explores practical tips to get your 2016 budget off to a good start.
4 Ways to Start Rebuilding Your Credit Today
There are a few ways you can improve your credit score. Start with a solid budget to begin repayment and make timely, consistent payments. Keep your spending in check with a secured credit card and a debt-to-credit ratio of 30 percent or less. With a little time and...
Why We’re Preferred by More Than 245,000 San Diegans
Mission Federal Credit Union has been serving the financial needs of San Diegans since 1961, and now with more than 245,000 members—we’re also the largest locally based financial institution exclusively serving San Diego County. Learn why so...
5 ways to enjoy a San Diego adventure
Wouldn’t it be nice to be a San Diego tourist? Vacation in your town with these San Diego adventure ideas. Whether you want to learn to surf, check out a sports game or explore the city, this blog post can help you be a tourist in your own town.
Search for Mission Fed Branches and ATMs, or 30,000 CO-OP Network ATMs Nationwide