Wednesday, February 6, 2008

Property Taxes

Along with owning a home come many, sometimes unpleasant, responsibilites. Paying property tax is one of them. It is simple in the "you own=you pay" equation, but there are many questions around property taxes that we hope to clear up. In San Francisco, the property tax rate for the 2007-2008 year is 1.141%. Thanks to Proposition 13, the maximum rate for property tax is limited to 1%. What you actually pay is that 1% in addition to all public approved voter projects such as schools, parks, highways, etc. This can make the tax rate vary slightly from year to year.

Property taxes are paid twice a year. They are due on December 10th, and again on April 10th. You will only recieve one bill each year with two pay stubs. Remember to put the second installment on your calendar as you will not receieve another reminder. You also have the option of paying both installments up front, in which case you would include both pay stubs. If you do not receive a bill, you still owe property taxes! If you do not receive your annual tax bill by November 10, you should request one by contacting the Office of the Treasurer & Tax Collector at (415) 554-4400. You can also visit to check your status and pay your bill online.

If you like the idea of putting money aside monthly towards your tax bill, you may be able to set up a reserves account with your lender which would allow you to break these payments up into monthly payments, and the bank would then pay your property taxes when they come due. Some people set up an account on their own where they can set aside the tax monthly into their own interest bearing account from which they draw to make the payment once or twice a year.

Properties are reassessed by the tax assessors's office upon a change in ownership or new construction. They are assessed based on the current market value, which is usually the purchase price.

At the time of purchase, you will be issued a preliminary title report for the property you are purchasing. Among other things, this document will show what the current tax rate is on the property based on the current owner's purchase price. It will also show whether or not the property taxes have been paid. When you are getting ready to close on the property, you will see an itemized list of closing costs. On the list will be property taxes. You will be responsible for paying them from the day of closing until the end of that term. If the seller has already payed them, you will be reimbursing them for the portion during your ownership.

Because the property will be reassessed at the time of purchase, you will be issued a supplementary tax bill. This will be a bill for the difference between the previous assessed amount and the new amount. This may come in one or two bills, and it may not arrive for months after closing. Don't worry, they won't forget about your. Until then, you will be paying taxes based on the previous owner's assessed amount.

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