Understanding Property Taxes Before Purchasing Your San Francisco Luxury Condominium

San Francisco is home to the Bay Area's sweeping coastline, the majestic Golden Gate Bridge, the Painted Ladies, and an unparalleled high end luxury real estate market. If you’re interested in San Francisco luxury real estate, it is essential to understand the unique property taxes in the state. We always recommend that an individual seek the guidance of a certified professional CPA. Here is a quick overview of what to expect. 

San Francisco luxury condos range from the classic Victorian styles to the sleek, state of the art modern styles of Mission Bay, South Beach as well the sprawling refurbished luxury warehouse lofts of Dogpatch and SOMA. All condos, lofts and homes all subject to state property tax laws. 

Not everyone who moves to a luxury San Francisco High-Rise condo have been brought up to speed in regards to the state’s property tax regulations. For a flawless transition into the Bay Area lifestyle, read on for Sean Mamola’s property tax guide to purchasing a gorgeous luxury highrise condo in San Francisco.

Throughout the years, the state of California has passed many iterations of state laws in regards to property taxes. The state laws on property taxes are constantly changing, however the most important one to prospective buyers would be Proposition 13. 

Proposition 13, according to the periodical First Tuesday, is short for "The People's Initiative to Limit Property Taxation.” The law was voted into California's Constitution in 1978 and has been upheld during subsequent Supreme Court rulings.

For those unfamiliar with California laws, the ballot originated as an initiative, which means it was put on the books by a majority of the public and voted into law. So, how does Proposition 13 (Prop 13) impact San Francisco luxury real estate?

Many San Francisco high-rise apartments  are well over a million dollars, this calculates a significant portion returned to the community in the form of property tax. The 1% tax rate is also determined by the purchase price of the real estate, according to Mac Taylor's research about Prop 13 in Common Claims about Proposition 13. 

Based on Taylor's findings and the legal code, Proposition 13 was meant to cap taxes and reflect larger national movements by homeowners in order to limit the amount charged by the tax assessor. Property taxes are a significant source of revenue for any state. Still, many buying real estate can occasionally overlook this portion of the transaction and fail to anticipate this additional bill. 

When it comes to Proposition 13, keep in mind that this initiative was established by the residents of California. When California's market soared, and it became an idyllic mecca for homeowners, those who already owned homes saw their properties increase in value. However, many older residents, who did not elect to sell their homes at the time, could not anticipate the magnitude of the change in the market. They found that properties once worth about $70,000 were now valued in the millions. However, while these individuals could afford property taxes on a $70,000 home, many foresaw that the state would levy their property taxes at astronomical rates if there weren't a cap on the market. 

When Proposition 13 was passed in 1978, it signaled a win for homeowners and remains so to this day. While other states have levied taxes at rates higher than 1% for the wealthiest property owners, 1% of potential property taxes for landowners in California was significantly less. Additionally, homeowners were not targeted with additional real estate taxes specific to their property value and could retain more assets. While other states have passed measures affecting real  estate-specific property tax increases, California has not done this and has kept it at 1%.

Other states charge much more than the initial 1% tax and 2% option in some areas, so those new to luxury High Rise real estate in San Francisco, should see it as a potential benefit. It might be a significant amount to pay, but it could be higher, and many individuals have saved money for decades based on the rate. 

Aside from the fact that many homeowners have saved on taxes over the years, there are several perks for existing residents. For those already in California, it is possible to transfer an existing property tax rate to a new property once during their lifetime. This translates to the following: If you currently own a property and are 55 or older, it is possible to transfer your current rate under certain circumstances. For older Californians, this means the possibility to move to properties that have also been impacted by the real estate markets' tremendous upticks without facing the higher rates that new property owners pay exists. Proposition 13 has a noticeable impact on luxury property taxes, by introducing the practice of capping taxes. When considering luxury properties and utilizing our bill estimation tool, it's important to keep Proposition 13 in mind. 

For and in depth outline of  Statewide property tax guidelines, always consult a professional licensed CPA.

If you are ready to see all that San Francisco has to offer, contact Rises.co today. The professionals at Rises.co are highly skilled in luxury real estate transactions, and have an impressive portfolio of successful sales.