Today TaxMama® hears from Lee in the TaxQuips Forum who wants clarification. “Are property taxes lower when a house is in a trust?”
No. The property tax is based on whatever the general rule is in your area.
In California, if you’re in this state (you must have been listening to KFWB last week), the property taxes are limited to 1% of the sales price of the property due to Proposition 13, oh so long ago. (The real rate looks more like around 1.25% because there are additional fees that aren’t really taxes – and, technically are not deductible as property taxes.)
What Valerie Faltas was talking about on the show is a special trick you can use with trusts.
Let’s say you have a property you bought for $600,000 in 2006.
Today, that property’s market value would be about $300,000 or so.
Normally, you could get a temporary reduction in your property taxes if you file a claim with the County Assessor’s office. But as you property’s value started going up, your assessment would rise, until the value was back up to $600,000 again.
Valerie’s trick was to arrange for a PERMANENT reduction in value for assessment purposes.
How? By transferring the property to another owner. The living trust would be another owner. You can force the re-assessment at the current market value, as if it were a sale. The Prop 13 property tax would drop to the $300,000 value permanently.
You have to dot the i’s and cross your t’s – but that’s essentially how it works. You can read the details in Valerie’s book, National Property Tax Little Black Book: Former Assessor Teaches You How to Save!
It’s not the trust that makes the difference; it’s the transfer to another owner. Using a living trust, YOU still own and control the property.
And remember, you can find answers to all kinds of questions about reducing property taxes and other tax issues, free. Where? Where else? At www.TaxMama.com.[Note: If you were subscribed to the e-mailed version of TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]
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