How Does Renting Affect Property Tax in California?

Question from Peaches, How Does Renting Affect Property Tax in California?

Answer from AI:

Understanding California Property Tax Rules

In California, property taxes are primarily governed by Proposition 13, which limits the annual increase of assessed property value to a maximum of 2% unless there is a change in ownership or new construction. This means that if you inherit a property, you can continue to pay the same property tax rate that your predecessor paid, as long as certain conditions are met.

Renting Out Your Property

If you decide to rent out your inherited property, it’s important to understand how this might affect your property taxes:

• Renting Out the Property: Generally, renting out your property does not trigger a reassessment of property taxes to market value under Proposition 13. The property tax rate remains the same unless there is a change in ownership or significant new construction.
• Change in Ownership: If you sell the property, the new owner will have the property reassessed at the current market value, which could significantly increase the property taxes.

Transferring Property Tax Base to a New Home

California allows certain homeowners to transfer their property tax base to a new home under Proposition 19. This can be beneficial if you decide to move to a new house:

1. Eligibility: To transfer your property tax base, you must be over 55, severely disabled, or a victim of a natural disaster.
2. Conditions: The new home must be of equal or lesser value, or you may face a partial reassessment.

Renting Out the New Property

If you move to a new house and transfer your property tax base, renting out the new property can have implications:

• No Immediate Reassessment: Similar to your inherited property, renting out the new property does not automatically trigger a reassessment to market value.
• Potential Reassessment: If you make significant improvements or there is a change in ownership, the property may be reassessed.

When to Seek Legal Advice

While the general rules are straightforward, property tax laws can be complex, and individual circumstances can vary. It is advisable to consult with a legal professional or a tax advisor to understand how these rules apply to your specific situation, especially if you are considering significant changes to your property or its use.

For more detailed information, you can refer to the [California State Board of Equalization](https://www.boe.ca.gov/) for resources on property tax laws and regulations.

Remember, this information is intended to provide a general understanding and should not be considered as specific legal advice. Always consult with a qualified professional for personalized guidance.