Property Tax Assessed Value Recalculation

Unhappy with the home you paid $150,000 for being assessed for property tax purposes at $450,000? The $300,000 is unrealized capital gains. Why pay taxes on a gain you have not seen?

In 1978, California passed Proposition 13 which had a massive impact on the property taxes of Californians. In my opinion this was one of the few things that has been done in California over the past 50 years that was reasonable and rational.

The following is a Wikipedia explanation of the main effect of Proposition 13

The proposition decreased property taxes by assessing values at their 1976 value and restricted annual increases of assessed value to an inflation factor, not to exceed 2% per year. It prohibits reassessment of a new base year value except in cases of (a) change in ownership, or (b) completion of new construction. These rules apply equally to all real estate, residential and commercial – whether owned by individuals or corporations.

Let’s consider the impact of this to a California resident who purchased a home in 1980 at a price of $96000. This was the assessed valuation in 1980. This house was sold in 2021 for $700,000. Now over time before the house was sold, $100,000 in capital new construction improvements were made and with the compound rate of inflation capped at 2%, the assessed value of the house at sale was approximately 325,000.

Without Proposition 13 this house in 2021 would have been assessed at $700,000 not $325,000 and the actual would have been over two times it was.

What Proposition 13 did was not allow the assesses valuation of a house to be based on the unrealized capital gains caused by the appreciated value of the property. Just because a property has a large amount of appreciated value, the property owner probably does have an equivalent appreciated value of their income.

A person on fixed income can be priced out of their home because of increased taxes due to the appreciated value of their home while a not receive an increase or minimal cost-of-living increase in their income.

It is time that Union County residents and Georgians in general, consider their own “Proposition 13” and control this unreasonable taxation on the unrealized capital gains in the appreciated value of their homes.

Vince Peterson - February 2023

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