Getting a Reappraisal to Lower Property Taxes
Q: Real estate values continue to drop in our area and we know that in this depressed market our home would not sell for its current property tax assessment value. How do we go about getting a reappraisal from the county? Is it possible to do this before the first installment of property taxes are due Dec. 10? --H.G.H.
A: First the good news: You can appeal your property tax assessment. Now the bad: You can’t do it until next year and you must pay the amount on the property-tax bill installments due by Dec. 10, 1992 and April 10, 1993.
Perhaps it would be best to quickly run through how property tax bills are set in California. Under the tax-limiting Prop. 13 approved by voters in 1978, homes are generally valued at their purchase price plus an automatic annual increase of no more than 2%. Even if property is declining in value, as it is today, state law allows an upward reassessment for property tax purposes if the overall cost of living in the state continues rising.
Before you can successfully challenge your tax bill you must determine that your home is worth less on the open market than the value the tax appraiser has assigned it. You cannot simply say that your home has declined in value from the previous year and therefore should not be slapped with a higher tax assessment value. It will be difficult for Southern Californians who have owned their homes for more than five years to make this case because homes were appreciating in value at a far greater rate than 2% annually five or more years ago.
However, if you purchased your home more recently, it is entirely possible that its current value is less than the value assigned it at the time of purchase plus the 2% annual increases. In fact, it is entirely possible that your home is worth less than you paid for it. If this is the case in your situation, you may appeal your assessment. However, your appeal will affect only the value assigned to your home as of March 1, 1993.
Your first step in this process should be to file by May 15 a “decline in value” application. Forms are available at your local assessor’s office. To support your case, you will be asked to provide data about the sales of three homes comparable to yours. You can usually get this information from a real estate broker, but your assessor’s office also maintains files of home sale prices. Once your application is filed, all you have to do is wait until you are notified of a decision.
If you don’t get the answer you want, you can appeal the decision to the Assessment Appeals Board. However, most counties accept appeals only during a specified period. In Los Angeles County, the period is between July 2 and Sept. 15. Further, the appeal must be filed on a specific form available only from your local assessor’s office. Once the appeal is filed, you may have to wait several months before being summoned to a hearing. At this point, you should come armed with all the information you have to support your case. Again, you must prove that the fair market value of your property is less than the tax assessor has assigned it; it is not merely good enough to argue that in times of declining property values you should not be subject to the 2% annual escalation.
Finally, you must remember that even though you are appealing your tax bill, you must continue paying it. If you fail to pay the amount levied, you could be subject to late payment penalties which are imposed regardless of whether or not you are challenging your bill.
When Does Wife Get Spousal Benefits?
Q: I am not receiving the amount of Social Security I think I deserve. I started taking benefits on my own account at age 65. My husband has continued to work and began taking benefits at age 70. At that time, I was shifted to spousal benefits on his account. However, I am not receiving 50% of what he gets. Shouldn’t I be? --P.M.L.
A: The maximum amount of spousal benefits to which you are entitled is 50% of what your husband receives at age 65. Since your husband chose to wait five years before getting benefits, he is receiving about 15% more than what he would have gotten at age 65. However, you are not entitled to 50% of that amount, only half of what he would have received at age 65. By the way, because your husband is 70 years old, he does not lose any Social Security benefits if he continues to work. Social Security recipients under age 70 are subject to benefit deductions based on the amount of their employment earnings.
Loss from Fraud Still Counts as Bad Debt
Q: In 1989 my husband and I invested $50,000 with a company that put the money in multiple second trust deeds on the same piece of property. The company is now insolvent and its owner was recently found guilty of fraud. Our investment is totally gone. How may we deduct our losses on our income taxes? --K.D.
A: Even though your investment was the victim of fraudulent activity, your loss is treated as routine non-business bad debt. Under this procedure you may write off any investment gains you have for the year, plus up to $3,000 in ordinary income, against the $50,000. Any unused portion of the $50,000--that is, any portion of the $50,000 that you do not have deductions against--may be carried forward to subsequent tax years. This process is continued until the entire $50,000 is deducted.
