Real Estate
Thanks to Prop. 13, Palos Verdes Peninsula's Property Tax Rates Among Lowest in State
Rancho Palos Verdes Estates and Palos Verdes Estates residents both pay an effective tax rate of 0.6 percent.
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PALOS VERDES, CA -- Residents in Beverly Hills pay some of the lowest property tax rates in the state, according to a recent study by Trulia.
People living further inland, however, aren't as lucky. They pay a higher property tax rate, according to the study released Wednesday. The reason has to do with Proposition 13, which was passed by voters in 1978.
The anti-tax measure caps property tax at 1 percent of the home's value at the time of purchase and limits property tax hikes to 2 percent a year. The tax assessment resets only when the home is sold. So, the longer people live in their homes, the more money they save in property taxes.
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This is the reason why Beverly Hills residents have a lower effective tax rate than their inland neighbors. According to the study, coastal residents tend to stay in their homes longer than those further inland.
“There is a geographic disparity in who benefits from Prop. 13,” the study said. “Residents in expensive coastal cities pay noticeably lower tax rates than residents in cheaper inland cities.”
Find out what's happening in Palos Verdeswith free, real-time updates from Patch.
Rancho Palos Verdes Estates and Palos Verdes Estates residents both pay an effective tax rate of 0.6 percent. How is that possible?
Say a home was bought for $100,000, the property tax for the first year would be $1,000 (or 1 percent of the home's value). In the second year, if the home's value increased to $150,000, under Prop. 13, the property tax can only increase 2 percent, meaning the home is assessed at $102,000, instead of its true market value. The homeowner would pay only $1,020, instead of $1,500, making it an effective tax rate of 0.68 percent.
If California homeowners pay taxes on their homes' true values, instead of the Prop. 13 assessed values, the state would receive an additional $12.5 billion in revenue just in 2015 alone, according to the study.
Trulia, a real estate website, used tax records, census data and its own property-value estimate data to determine the effective tax rate for the study.
Photo via Shutterstock
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