How To Successfully Reduce Your Property Tax Basis In San Francisco?

From one agent, to their company, and we’re bringing it to you.

I have some clients who applied to the Tax Board to have their property tax basis reduced and the city rejected it, even though they presented valid comps indicating their property value has decreased (they live in Pacific Heights). I’m wondering if [any Realtors] or their clients have had a successful experience appealing this type of decision, and if they have any suggestions for the appeal.

We have no suggestions, but can tell you our Inbox currently has four “unread” emails asking us for assistance running comps to help some owners fight this very same battle. You are certainly not alone.

So…who has won, and what helped get you there? Who has lost, and why?

Any insight is appreciated. Please share your experiences (good or bad) in the comments below.

36 thoughts on “How To Successfully Reduce Your Property Tax Basis In San Francisco?

  1. That’s the problem with politicians in San Francisco. Assessor Phil Ting has time to play on twitter while there’s a huge backlog on work in his office. I sent a letter 1 month ago and still waiting for an answer.

    The problem with the Assessment Board is that it is biased. All the board members are chosen by either the Supes or the Assessor himself. Do you really think they are going to lower tax bills and reduce the city’s income during budget cuts? The smart way to do it is cut everyone’s tax bill by at least 10-15% across the board if your purchased between 2005-2008. Save time and stop wasting on useless employee income,

  2. Would such a reduction impact a typical mortgage agreement in terms of no longer having 20% in equity?

  3. Did these people have their homes reappraised or did they simply rely on comps? Perhaps that’s part of the problem.

    I would also be curious if the most recent tax bill reflects all of the recent changes. A totally made up example with round numbers:
    1. House purchased for $100k
    2. House later valued at, and taxed at $150k
    3. House “value” at the peak, $200k
    4. Current house “value”, $175k
    5. Request reduced tax bill
    6. Request denied because the house is still worth more than the taxed value.

    And as far as poster ‘anon’s suggestion of an across the board tax cut: No, no, no, a thousand times no. If one purchases a home, one must be able to pay ALL of the costs including taxes. One is allowed to file for refinances, tax assessment adjustments, etc. but one must work through the system.

    My thinking is these rejections were for cause and the folks being rejected should determine what the “flaw” in their case was (like an incomplete appraisal/assessment) and appeal.

    From the Assessor’s website – apparently my thought about appraisal is off, so according to the original post the Assessor’s office is violating the law? Or, more likely, we don’t have enough information on the cases in question:
    “How do I appeal my assessed value?

    Under State law, if the market value of your property (recent comparable sales) as of January 1 falls below the assessed or taxable value as shown on your tax bill, the Assessor’s Office is required to lower the assessment. This type of property tax relief generally applies to recently purchased property. Assessment appeals maybe filed from July 2 to September 15. Please make sure to file your application with the Assessment Appeals Board before the deadline.”

  4. “And as far as poster ‘anon’s suggestion of an across the board tax cut: No, no, no, a thousand times no. If one purchases a home, one must be able to pay ALL of the costs including taxes. One is allowed to file for refinances, tax assessment adjustments, etc. but one must work through the system.”

    WHY? Other counties in the Bay Area has done this. Across the board cuts. If legit, you can get a tax reduction in San Mateo, Marin, and Sacramento in 30 days. You’ll have to wait at least 2 months before San Francisco even gets to your appeal.

  5. Just sell your house and buy a new one at market rates and get your tax basis reset. Although as a renter, I’m biased, but if you cannot reassess an older home to increase tax basis, why should an exception be made for decreasing your tax basis. Just another reason the Prop needs to be phased out.

  6. Gotta love California’s ballot initiative system.

    Prop 13 limits tax increases to no more than 2% per year, regardless of current assessment.

    Prop 8 [no, not THAT prop 8, this is an earlier one!], in turn, allows you to get your assessment reduced if current home value is less than your prop 13 assessment.

    So homeowners are protected on the way up and on the way down, but local governments are screwed both ways.

  7. While I don’t think Proposition 13 is an equitable distribution of State and local governments’ revenue burden, for those of us in our 30s that have saved for say ten years to finally buy a condo or home and did so in the last five years it would appear that we have no protection in the current climate. I certainly hope there is a path to “reassessment” but sadly in this City government seems to be much more about those who govern than those that are governed. Also, what did our government due with all the property tax growth driven by the escalation in home prices?

    On Prop 13, isn’t there another solution? I was speaking to a gentleman this weekend who has lived in his Upper Haight home for 30 years and pays approximately $2,000/year in property taxes. I, on the other hand, pay $12,000 for a house that is comparable in value. My only “sin” was buying a home in 2004 instead of 1979 yet I pay much more to the City than he does. Now I certainly don’t think the right answer is for his property tax to go up 6 times but at the same time I don’t think I should carry 6x the tax burden that he does.

    Isn’t there a middle ground somewhere?

  8. Not really, no.
    He bought that house based on 1979 affordability, and 1979 property taxes.
    It could happen where (like in the past) if prices doubled or even tripled and property taxes did the same people wouldn’t be able to afford the monthly payments – and would have to sell, despite clearly being able to afford at the time of purchase. Being forced out of your home due to its appreciation would be a weird irony.
    The current system is fair imho – you know your costs at the time you buy the place – linking future taxes to the market just adds another layer of uncertainty.
    I actually don’t think the taxes should be able to be reduced in falling markets either, but understand I will be in a minority here.

  9. Interesting view. Definitely made me re-think my view.

    But again I don’t think this is about affordability of one’s home or that they know this cost going in, etc. but equitable sharing of the costs of running a city.

    At the end of the day Property Tax contributes more than any other source to SF’s General Fund, 37%. Is in really equitable when two similar people pay such different amounts into this fund?

    To be clear, I am definitely not advocating he pay $12K, just that we evolve to a system where one person isn’t paying 6x as much in taxes for the same exact access to services and benefits.

    Finally, in terms of the I know this going in: what choice does someone like me have? Even if I purchased a condo at the SF median price of $650K or so I would still be paying more in property tax than this gentleman, and I would be in a condo and he would be in a house.

    Or more importantly, working backwards I would need to buy a home for $172,000 to pay the same as this person which is totally impossible … so regardless there is a penalty for basically being born later. Just not sure how that can be deemed “fair.”

  10. It should be needs based, it shouldn’t be across the board. There’s a system in place to handle the issue.

    Listen, one can afford to buy the house, gets the benefits of a mortgage deduction, etc. then one needs to pony up for taxes.

  11. And no, I don’t own, but, I do have a small business and no one is offering me an across the board reduction in my business taxes or licenses even though my income has gone down significantly. At least homeowners still have their houses.

  12. Slappy, is your business tax a function of the value of your business? I would guess no . . . part of your business taxes are probably a function of net income (generalizing as don’t know if you are a C or S Corp., LLC, etc. but the general premise holds true) and for certain businesses part is driven by inventory levels.

    So in these tougher times you are paying less tax if you are less profitable and if you hold less inventory, which one surely would in a recession.

    Just want to make sure we are comparing apples-to-apples here.

  13. No one has presented a compelling argument in favor of Prop 13, ever. Please point me to one. CA is the only state with this insane property tax issue and it seems to be causing lots of issues.

    I’m with MM that finding a solution to more equitably distribute the tax burden to reflect the apportioned consumption of services is only fair. It certainly costs the city more to collect trash, etc… that it did in 1979 yet that home buyer is still paying a disproportionate rate subsidized by more recent buyers.

    The real issue is government spending the increased tax revenues as fast as they can get them; but Prop13 is still a joke and will ultimately be repealed at some point. No one that isn’t benefiting from Prop 13 has an unbiased view. Until this burden is carried by a majority of the voters in this state we will not see a change.

  14. Amen to eddy. I just don’t know if any politician will ever touch this “third rail” of California politics. This is yet another exhibit on why the initiative process is a bad idea – the average Californian shouldn’t be voting on specific tax and budget rules. Either we’re a republic or we aren’t.

    Regardless of which side of the political spectrum you fall on, our beloved State is in big trouble:

    http://www.economist.com/displaystory.cfm?story_id=13649050

  15. I gotta say, the CA government is in dire straits, and they are going to stop at nothing to keep property taxes high.

    Even if you have three very similar comps that are 20% below your purchase price, they won’t budge. It’s absolute horse donkey they don’t adjust property taxes according to current property price values.

    Homeowners already have so many riders in their property tax bill that pay for so many different programs. Can’t the government just spread the tax bill wealth around a little more?

    Rgds,

    RB

    Rich By 30 Retire By 40

  16. $800 CA Corporation Tax for the “pleasure of doing business in California” regardless of whether there is any revenue or profit.

    Business license fee is also revenue/profit independent.

  17. The City is in a budget crisis. Even with a compelling presentation to the appeals board, I doubt the city is going to give up tax revenues.

    Eddy, prop 13 will never in a billion years be rrepealed. That is about as likely to happen as a switching to a federal flat income tax rate of 60%. Basically any retired family on a fixed income would have to sell their home and move to a different locale because they could not afford the tax increase.

  18. AC, I believe you are wrong. Repealed doesn’t mean reversed overnight. This would obviously cause major problems. But a phased in approach, over a very long period, with certain defined exemptions for specific situations that could easily be identified, is very much a likely scenario down the road. Property Tax is just a very basic way to efficiently allocate gross tax burdens and it is presently anything but efficient, or fair. It is also being abused by many in the system.

  19. To eddy’s point, I don’ think anyone is arguing for people with lower property tax bills to start paying amounts based on their property’s real current value. I think the broad view/point here is that the current equation for calculating property tax is not fair nor does it spread the financial burden evenly, even if evenly means progressively so that the wealthy pay a higher percentage than the not wealthy.

  20. To Matthew Murray’s point about the evenness of taxation…I think one thing that needs to happen is somehow, someway, some “adult supervision” needs to be found to look at the entire revenue(taxes)/expenditure model in California, take it apart, fairly identify what the “reality” of the situation is, and put it back together with a rationale explanation as to why with a focus on sustainable, reasonable values on both sides of the ledger. This boom/bust nonsense needs to stop.

  21. Can we get back to the point? Prop 13 is a different topic.

    I think the discussion is (in case anyone forgot) under the current law/process/condition, what’s the best way to reduce the property tax bill.

  22. I would actually wait a little while.
    I expect prices to be a lot lower in 6 months than they are now, especially for condos and higher end SFHs.

  23. I bought a home in July 2008. Surely it has reduced in value, and in the meantime I’ve lost my job. Getting an assessment reduction would be helpful for me to stay solvent and in the house.

    However, I just got my notice in the mail, and they raised my property taxes. How on earth they can justify that is beyond me.

  24. Thanks to the person that said let’s keep this on topic…

    Any stories on folks successfully reducing their tax bill? My friend is looking at this. He actually is also looking at re-fi’ing so not sure but if he’s successful in reducing his tax-basis, it’s going to hurt him when he goes to re-fi and they do an appraisal.

    Anyway, would be interested to hear folks who were successful. I also would be interested to know: about how much $$ does one need to budget to put up an appeal if the city declines the initial request?

  25. I got my tax valuation reduced.
    After an appraisal that showed the value of my home down to 598K from 660K (paid) or 720K (tax assessment) I filled out the request for informal review on with the info from my appraisal- which, luckily, was on the last date appraisals will be considered for 2009 taxes, March 31, 2009. I heard on July 6 that my taxes were being reduced- for this year only- to reflect the valuation of 598K. If I had not heard then, I was going to have to file for a formal review in room 405 at City Hall or mail in a form from with a check for $30. This is a first come, first served review and available for requesting through the first week of September.
    I already got mine and my refinance, too. I hope you will find this information useful and rewarding.
    Christopher Enzi
    enzihair.com

  26. That’s www-dot-sfgov-dot-org-slash AAB
    Take out the dashes and replace the word dot with, well, a dot. That should give you the page with the forms and information for filing a formal review.

  27. Thanks for the great info. With property values way down there are many home owners may be able to benefit from reduced property taxes.

  28. Not based on any personal experience, I just can’t imagine anyone even thinking that “comps” will be accepted to reduce your tax basis. The person with the bank appraisal was successful. That makes sense. And in my experience in the last 6 months, appraisals will be in your favor for a tax reduction because the appraisers are covering their tails with the banks and appraising very low.

  29. Has anyone heard of propertytaxlittleblackbook.com ? Valerie Faltas who used to work for LA county’s tax assessor claims she has a way to reduce your property taxes and through a loophole keep them that way. The prop 8 temporary reduction will become PERMANENT. She will tell you how it can be done LEGALLY but for a $197 fee to buy her guide and audio CD. She does guarantee 100% money back if not satisfied. Thinking of trying this one out but does anyone know if it’s even possible?

  30. Why must the load of our schools be placed soley on homeowers in the first place? Way more renters than owners in SF and I’ll bet way more renters with school aged kids. We all want better, we should ALL should share the load, that simple. Wonder how renters would react to getting a renter’s school tax bill in the mail.

  31. Trigger a change of ownership by putting the property in an irrevocable trust or a LLC with a trusted party that is not currently pmtitle as a diminimus owner. Consult your attorney and or tax expert for more info on how this is done to make sure you do it correctly and understand the long term tax impacts.

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