If you live in California, particularly in Bakersfield, or are about to become a resident of this warm community, knowing the property taxes and how California manages the property tax through Proposition 13 must be on your to-do list.
Fortunately for you, we have brought all this important information packed in a small conversation. So, hop in you are going to be one property tax pro when you finish reading this.
Let’s begin!
Property taxes in California
California gets its money in property taxes a little differently. Initially, the property taxes in California were exorbitant.
This is because California was a dream place and had a high influx of people coming in buying property and making a life here.
Before the 70s the taxes were unbearable however with the introduction of Proposition 13 the taxes were limited to an annual increase of 2 percent. This made life easier for Californians, property tax-wise.
This is one of the main reasons that in towns all around California old houses pay little property tax as the taxes have only increased 2 percent per year since they are built.
PITI
PITI is a cardinal rule for realtors not just in Bakersfield. PITI stands for principal, interest, taxes, and insurance. It is called the impound account and helps one in calculating the worth of a property.
Since taxes in every county are different, the value of property in every county comes out different too. And this is what you pay every month in your mortgage. It wouldn’t be wrong to say that your mortgage is a composition of your borrowing money, the interest on the borrowing, the property tax you pay every month, and your homeowner’s insurance.
Once you assume complete ownership of your house you are no longer going to pay principal and interest. Your sole payment would be taxes and insurance.
Taxes
Once you pay off your loan with interest things tend to get a little simpler. The reason is that with the impound you have to make the payment every month, but when the loan is over you can pay off the taxes and insurance twice a year.
That will be the 10th of December or the 10th of April whatever suits you. If you like you can also make one big payment and be stress-free for the rest of the year.
Since we talked about Proposition 13 and the amazing it had on the public tax-wise it is important to note that there is a downside here as well. The thing is proposition 13 is not completely innocent when it comes to increasing property taxes. Your county has it covered. How?
Each county collects the taxes in the name of development in bond measures. Bond measures increase overall property taxes and several times homeowners remain unaware of how much money goes into bond measures.
So you must remain vigilant about your local politics and keep an eye on the bond measures because they will ultimately affect you.
Another important thing to keep in mind is that if you do any modifications in your property such as adding a story, another room, etc that can also increase your property tax. I know that’s crazy but it is because you start occupying more length or width.
Supplemental
There is another concept about property taxes when it comes to change of ownership. The tax paid when the new owner comes after the house is sold to him is called a supplemental. It is the difference between what the old owner was paying in taxes with what the new owner should pay.
This becomes a large amount depending upon your purchase. So if you are just naming the property to your grandchildren or someone you care about be sure to sign the deed once you are sure that the supplemental is not too high. Otherwise, it will cost your loved ones a lot.
Don’t feel you are having too many obstacles. Every state follows the same principle of getting as many taxes from its citizens as possible.
Why Proposition 13 should stay?
You might be thinking that instead of having Proposition 13 at 2 percent and then getting all the extra dollars in bond measures and the name of development, why can’t the state just remove Proposition 13? Everything will become less shady and people could care less about voting for someone at the local and higher level.
The answer to this is that it will be a disaster for homeowners and home sellers alike. If the property taxes do not remain at 2 percent it will keep on going as and when the government pleases and it will reach 16 to 17 percent in no time. So for now Proposition 13 favours all.
Tips to follow
You should remain aware of what is going on in not just your county but also in the white house. You vote in people whose policies favour not only you but your generations to come who will ultimately assume ownership of your property. You should set the title knowing all the INS and outs of property taxes in your respective county.
A one-to-one meeting with your financial advisor is not such a bad idea at this point. They have eyes and ears on everything and will guide you according to the present situation so that you can get maximum benefit when you buy a property. Knowing this information is crucial before you shack up in Bakersfield so that you take your decisions accordingly.
Conclusion
Wrapping this up, you are now mindful of all the backend information about taxes in the state of California. If you use this information properly you will not suffer economically in losing extra dollars in taxes.
There is nothing wrong with paying taxes course the state does that to take care of its citizens but you must remain vigilant of where your money is going and in what categories you are paying so that you don’t suffer at any point.
