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How would property taxes deferral work? Let’s say the value goes way up for 15 years, then goes way down again, and you sell your house… are you on the hook for

How would property taxes deferral work? Let’s say the value goes way up for 15 years, then goes way down again, and you sell your house… are you on the hook for those back taxes even though you didn’t make any money on the sale? If you are, then you are screwed… if you aren’t, then it seems more like a sales tax than a property tax.

lostdog 4y ago
As long as we limit the payable tax to the sale price of the home, then you're not screwed. It would suck to have all the money disappear, but if you didn't pay your mortgage then you would also owe the entire amount of the sale price too.
- charlieyu1 4y ago
  I’m never a fan of any form of capital gains tax. When I earn money I’m liable for tax, but what if I lose money? I’d be responsible for the whole amount loss.
  - Our_Benefactors 4y ago
    You can claim capital losses a tax deduction up to $3000 per year and it carries over to subsequent years. So this isn’t entirely true.
    - leoqa 4y ago
      Does that imply an effective limit of $150k or so? I've definitely had capital gains tax higher than that.
    - medvezhenok 4y ago
      I believe that it's 3000 per year to offset other income (i.e. labor income). You can use capital losses to offset other capital gains without limit.
      - JamesianP 4y ago
        And either way it's only not taxing you for money you didn't get. They never share your pain in the same sense that they share your success.
    - bombcar 4y ago
      You cannot claim capital loss on a house sale.
  - dtgriscom 4y ago
    Rich people have assets which sit there and appreciate, and when they sell them they usually get more cash out that they put in. I strongly believe that those capital gains should be taxed. Yes: if you invest in something the value can go down, but I don't think the government should compensate you for that. You should just be careful where you invest your money.
- pxeboot 4y ago
  > but if you didn't pay your mortgage then you would also owe the entire amount of the sale price too. This isn't always true. It doesn't happen very often, but if you are not underwater after a foreclosure, the bank owes the owner the difference.
jeffbee 4y ago
It works the exact same way as any other lien. It becomes due as soon as the property is transferred for any reason. If the sale is not enough to cover the liens, it’s the lien-holders who get screwed, not the seller.
jlhawn 4y ago
This is why, I think, property taxes should not be based on the "full cash value" of a property but instead be based on the rental value. The market selling price that we used today is a lot more volatile than rental value because it is based not only on the rental value but also factors in the current interest rate, a speculative premium on future returns, and holding costs such as the property tax itself. Think about how rents have changed over the past few years versus home sale prices, particularly with interest rates being a roller coaster these past few years. If county assessors instead kept track of the rental price of comparable properties, the assessment would be a lot less volatile. This policy would also lead to homeowners having their interests more aligned with renters: keep property taxes stable by keeping rents stable.
- poulsbohemian 4y ago
  >Think about how rents have changed over the past few years versus home sale prices In my area, rents have gone up concurrent with house prices - but aren't falling now that sales inventory is falling, because those owners still want to cover the mortgage. > property taxes should not be based on the "full cash value" of a property That's not quite how property taxes are calculated, at least not in the two states where I sell real estate. In fact, even after a house has recently sold and there is a new market value established, the property tax basis doesn't increase up to that new market price. I just went through this with an out-of-area buyer, where I took the houses I sold last year that were comps to the one they wanted to buy and showed them the new tax assessment for this year. Yes each had increased, but nowhere near the market value (in fact, the tax assessed value was between 50-60% of the market prices).
  - jlhawn 4y ago
    My comment was more about California, specifically, as that's what the original post was about. The state constitution uses the term "full cash value". I dislike the term "Assessed value" because so many people assume it's the same as "appraised value" which is a term that buyers, sellers, lenders, and real estate agents are usually more familiar with. I very much agree with the OP in that I think we should be explicit about the subsidies and/or exemptions that we give instead of hiding them in the way that taxes are assessed.

lostdog 4y ago

As long as we limit the payable tax to the sale price of the home, then you're not screwed. It would suck to have all the money disappear, but if you didn't pay your mortgage then you would also owe the entire amount of the sale price too.

charlieyu1 4y ago
I’m never a fan of any form of capital gains tax. When I earn money I’m liable for tax, but what if I lose money? I’d be responsible for the whole amount loss.
- Our_Benefactors 4y ago
  You can claim capital losses a tax deduction up to $3000 per year and it carries over to subsequent years. So this isn’t entirely true.
  - leoqa 4y ago
    Does that imply an effective limit of $150k or so? I've definitely had capital gains tax higher than that.
  - medvezhenok 4y ago
    I believe that it's 3000 per year to offset other income (i.e. labor income). You can use capital losses to offset other capital gains without limit.
    - JamesianP 4y ago
      And either way it's only not taxing you for money you didn't get. They never share your pain in the same sense that they share your success.
  - bombcar 4y ago
    You cannot claim capital loss on a house sale.
- dtgriscom 4y ago
  Rich people have assets which sit there and appreciate, and when they sell them they usually get more cash out that they put in. I strongly believe that those capital gains should be taxed. Yes: if you invest in something the value can go down, but I don't think the government should compensate you for that. You should just be careful where you invest your money.
pxeboot 4y ago
> but if you didn't pay your mortgage then you would also owe the entire amount of the sale price too. This isn't always true. It doesn't happen very often, but if you are not underwater after a foreclosure, the bank owes the owner the difference.

jeffbee 4y ago

It works the exact same way as any other lien. It becomes due as soon as the property is transferred for any reason. If the sale is not enough to cover the liens, it’s the lien-holders who get screwed, not the seller.

jlhawn 4y ago

This is why, I think, property taxes should not be based on the "full cash value" of a property but instead be based on the rental value. The market selling price that we used today is a lot more volatile than rental value because it is based not only on the rental value but also factors in the current interest rate, a speculative premium on future returns, and holding costs such as the property tax itself. Think about how rents have changed over the past few years versus home sale prices, particularly with interest rates being a roller coaster these past few years. If county assessors instead kept track of the rental price of comparable properties, the assessment would be a lot less volatile. This policy would also lead to homeowners having their interests more aligned with renters: keep property taxes stable by keeping rents stable.

poulsbohemian 4y ago
>Think about how rents have changed over the past few years versus home sale prices In my area, rents have gone up concurrent with house prices - but aren't falling now that sales inventory is falling, because those owners still want to cover the mortgage. > property taxes should not be based on the "full cash value" of a property That's not quite how property taxes are calculated, at least not in the two states where I sell real estate. In fact, even after a house has recently sold and there is a new market value established, the property tax basis doesn't increase up to that new market price. I just went through this with an out-of-area buyer, where I took the houses I sold last year that were comps to the one they wanted to buy and showed them the new tax assessment for this year. Yes each had increased, but nowhere near the market value (in fact, the tax assessed value was between 50-60% of the market prices).
- jlhawn 4y ago
  My comment was more about California, specifically, as that's what the original post was about. The state constitution uses the term "full cash value". I dislike the term "Assessed value" because so many people assume it's the same as "appraised value" which is a term that buyers, sellers, lenders, and real estate agents are usually more familiar with. I very much agree with the OP in that I think we should be explicit about the subsidies and/or exemptions that we give instead of hiding them in the way that taxes are assessed.