Could a Home’s Decline in Value Create a Lowered Tax Base?
January 3, 2008
In an effort to help ease some of the pain with declining values, some Tri-Valley homeowne
rs may be able to take advantage of Proposition 8. I have provided a short summary below as well as links to the Contra Costa County and Alameda County Tax Assessor’s site to help you better understand the proposition and to see if you qualify. Here is my upfront disclaimer - contact and consult a tax advisor and/or attorney to understand the full impact of this proposition and whether or not you qualify.
Proposition 8 amended Proposition 13 to allow assessed values to reflect declines in value. As a result…the Assessor is required to enroll a property’s fair market value, as of January 1, if that value is less than the Base Year Value plus inflationary adjustment (Proposition 13 value).
Keep in mind, an assessment under Proposition 8 is a temporary assessment. The value of the property must be reviewed each January 1 to determine whether the current Fair Market Value remains less than its Base Year Value plus inflationary adjustments. The value calculated under Proposition 13, with its annual inflationary adjustment, continues to be tracked and remains the maximum assessed value allowed. If the Fair Market Value of the property increases above its Base Year Value plus inflationary adjustment, the Assessor will once again enroll the Proposition 13 value.
Something else to be aware of is that even though the Proposition 8 value represents current Fair Market Value, it can fluctuate from year to year without limitation, to reflect changes in the market. It is not under the 2% inflationary adjustment limitation of Proposition 13.
The bottom line is that although the values of many properties may suffer a significant decline during a downturn in the market or a recession, not all may qualify for a Proposition 8 reduction. The current Fair Market Value must fall below the Base Year Value plus inflationary adjustment, before it will affect the assessed value.
Further information and examples, for the Tri-Valley, can be found with the following links to the various county tax assessor websites - Contra Costa County or Alameda County.
Information provided herein is deemed reliable, but is not guaranteed. Please consult an attorney and/or a tax professional before making any decisions.
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