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>Most heirs are not equipped to take on a tax bill that could potentially jump from $800 to $20,000 on the death of a parent, This is a misleading and extremel

>Most heirs are not equipped to take on a tax bill that could potentially jump from $800 to $20,000 on the death of a parent, This is a misleading and extremely outlying example. No one in CA, even if they bought their house for $80,000 and never made a single capital improvement, still has only $800 property tax bill, because it goes up each year (just not as much as the market value). And to get an increase of $20K in property tax, the house would have to be worth $3,000,000, which is still far above the median. More importantly, the income tax benefit is orders of magnitude a bigger deal. Income tax on a $2,000,000 gain would be 23.8% federal at least, and probably well over 10% California (so about $650,000). Yet they will pay none of that, due to the basis adjustment to fair market value upon death of the owner(s). If the heirs can't figure out how to keep the house via a secured loan and their $650,000 in income tax savings, they probably have much more pressing money problems to deal with I imagine.

pauldenton 3y ago
So what is the Median house value in California? Or San Francisco which this SFChronicle article is from?
- instagib 3y ago
  800k Cali. 1.3M SF.
  - appplication 3y ago
    1.3M would probably be property (including condo etc), not house. Though that is probably what the original asker intended.
davidfischer 3y ago
This isn't as crazy an example as you think. People and companies who bought properties before prop tax increases were capped in 1978 are paying almost nothing in property taxes. I live in California but not in the Bay Area in a house Zillow estimates at $1.2M. I have a neighbor in an admittedly smaller house that Zillow estimates at $740k. In 2022, they paid $482 dollars in property taxes on an assessed value of $34.5k. Whenever they sell, the new owner will pay 20x in taxes. Sites like Zillow show all of this and I can find multiple examples within a couple blocks of my house.
- PopAlongKid 3y ago
  If someone has owned their house nearly fifty years and has not made any significant capital improvements, Zillow does not know what their heat source is, whether they have air conditioning, etc. Maybe their electric service is still fused, instead of a circuit breaker panel (or whatever the technical term is), and they have old fashioned two-prong outlets. My point is, Zillow does not have the same detail and historical info on a house that hasn't sold in so long, so their estimates are more questionable. Despite your anecdata, I still wager that very few people as percent of overall homeowners have owned and lived in the same house for fifty years without making major improvements.
  - davidfischer 3y ago
    Zillow's estimates are definitely questionable and I don't want to be seen as defending their precision. However, unless you're referring to an actual house addition or something like earthquake retrofitting, most capital improvements are rounding errors to the value of a house in California. Land alone (vs. "improvements") for a house purchased recently is ~70% of the value and you can see this broken out on a property tax statement. Replacing knob and tube wiring or putting in AC is low tens of thousands of dollars at most and frequently those minor things aren't even reported to the assessor. Sure, an old house that hasn't been updated isn't going to sell for as much as one that has, but unless it's a major change, it isn't going to be hundreds of thousands in difference. Because I can't query Zillow's data, I don't know any better way to do it than find a neighborhood where most of the houses are old and just see what their property taxes are one by one. In my neighborhood which was built in the 1910s and 1920s, there's quite a few examples of people paying sub $1k in property taxes per year. It isn't a majority or anywhere close to it but within a couple blocks of my house I found nearly 10 examples. I even found a 4-unit multifamily paying just under $1k total. If you want a pure anecdote, a friend in a nearby house just had the knob and tube in their house replaced with modern electrical (~$35k). The electrician found gas lines in the 1st floor ceiling for indoor gas lighting. Although the lighting fixtures were gone, the gas lines were still hooked up to the main house gas line.

pauldenton 3y ago

So what is the Median house value in California? Or San Francisco which this SFChronicle article is from?

instagib 3y ago
800k Cali. 1.3M SF.
- appplication 3y ago
  1.3M would probably be property (including condo etc), not house. Though that is probably what the original asker intended.

davidfischer 3y ago

This isn't as crazy an example as you think. People and companies who bought properties before prop tax increases were capped in 1978 are paying almost nothing in property taxes. I live in California but not in the Bay Area in a house Zillow estimates at $1.2M. I have a neighbor in an admittedly smaller house that Zillow estimates at $740k. In 2022, they paid $482 dollars in property taxes on an assessed value of $34.5k. Whenever they sell, the new owner will pay 20x in taxes. Sites like Zillow show all of this and I can find multiple examples within a couple blocks of my house.

PopAlongKid 3y ago
If someone has owned their house nearly fifty years and has not made any significant capital improvements, Zillow does not know what their heat source is, whether they have air conditioning, etc. Maybe their electric service is still fused, instead of a circuit breaker panel (or whatever the technical term is), and they have old fashioned two-prong outlets. My point is, Zillow does not have the same detail and historical info on a house that hasn't sold in so long, so their estimates are more questionable. Despite your anecdata, I still wager that very few people as percent of overall homeowners have owned and lived in the same house for fifty years without making major improvements.
- davidfischer 3y ago
  Zillow's estimates are definitely questionable and I don't want to be seen as defending their precision. However, unless you're referring to an actual house addition or something like earthquake retrofitting, most capital improvements are rounding errors to the value of a house in California. Land alone (vs. "improvements") for a house purchased recently is ~70% of the value and you can see this broken out on a property tax statement. Replacing knob and tube wiring or putting in AC is low tens of thousands of dollars at most and frequently those minor things aren't even reported to the assessor. Sure, an old house that hasn't been updated isn't going to sell for as much as one that has, but unless it's a major change, it isn't going to be hundreds of thousands in difference. Because I can't query Zillow's data, I don't know any better way to do it than find a neighborhood where most of the houses are old and just see what their property taxes are one by one. In my neighborhood which was built in the 1910s and 1920s, there's quite a few examples of people paying sub $1k in property taxes per year. It isn't a majority or anywhere close to it but within a couple blocks of my house I found nearly 10 examples. I even found a 4-unit multifamily paying just under $1k total. If you want a pure anecdote, a friend in a nearby house just had the knob and tube in their house replaced with modern electrical (~$35k). The electrician found gas lines in the 1st floor ceiling for indoor gas lighting. Although the lighting fixtures were gone, the gas lines were still hooked up to the main house gas line.