The terrible fires that have ravaged Los Angeles County and other parts of the Southland aren’t even fully contained and our offices here at the Howard Jarvis Taxpayers Association are already getting calls from victims who are ready to press on and move forward to start rebuilding. It has been an important reminder that one of the great things about living in California is the people. In many ways, they still have the pioneer spirit that built this great state and country.
But everyone has questions about how the disaster will affect their property taxes, now and after they rebuild. On this, there’s good news.
First, a property that has been damaged or destroyed by a calamity or disaster (that includes not only fires, but also earthquakes, floods, mudslides and the like) can be reassessed to a lower “taxable value” so you aren’t hit with taxes on a house that no longer exists.
To qualify for a “misfortune or calamity” reassessment, the damage to your property must exceed $10,000 of the current market value. Obviously, if your house was destroyed, you certainly qualify. But even if your house is still standing, the decline in your property values from the neighborhood being destroyed around it likely qualifies you for a “decline in value” reassessment that will provide property tax relief.
It’s also important to note that this tax relief not only includes damage to your house or business property but also business equipment, agricultural property like an orchard, aircraft, boats, and some manufactured homes. If you pay property taxes on it, it’s likely eligible.
Los Angeles County Assessor Jeff Prang is proactively reassessing properties in the burn areas, so to get this relief, nothing is required. That said, there is a form, and it’s still good to fill it out to make sure the assessor’s office knows where to contact you. The forms to request reassessment after a disaster or decline-in-value are available on the county assessor’s website. Return the form to the assessor’s office within 12 months of the date of loss (or sometimes later, if the county allows).
Some homeowners may also be eligible for property tax postponement, an income-qualified program operated by the State Controller’s office.
Next comes the decision to rebuild or move. The good news: you can do either and keep your Proposition 13 tax base.
Here’s how.
According to the Board of Equalization, if you choose to rebuild on the same site after the property has been “substantially damaged or destroyed,” you can keep your Prop. 13 base-year assessment “if the reconstructed property’s market value is comparable to the damaged property in size, utility, and function.”
Well, what does that mean? The BOE says that “substantially damaged or destroyed” means “that the improvement must sustain physical damage amounting to more than 50 percent of the improvement’s full cash value immediately prior to the disaster as determined by the County Assessor.” Again, if your house was destroyed, you most likely check that box.
“Comparable in size and utility” means that “the reconstructed property may not exceed 120 percent of the market value of the property prior to its damage or destruction.” So, for example, if your old house was worth $1 million, you can go up to $1.2 million without a tax increase.
If you do go over that 120 percent, don’t worry, you aren’t getting completely reassessed. The excess market value will just be added to your old value. Yes, your property taxes will go up but will still likely be well under market value.
You must rebuild within five years by law, but that has been extended in other fires to eight years and will likely be done here too, if not longer.
If you just want to move and take your Prop. 13 value with you, you can but it must be done within two to five years depending on whether the move is within your county or to another county. It also must be to a property of equal or lesser value to keep the same tax bill. You can buy a property of any value, but anything extra will be added on, just as if you were exceeding that 120 percent when you rebuild.
I know this is a lot to take in, but the good news is that you have time. There are also a lot of helpful resources that will provide greater detail as you navigate through this process.
For more information about the resources available in Los Angeles and to download the claim form (ADS-820), go to assessor.lacounty.gov/tax-relief/disaster-relief or call (213) 974-3211.
The Board of Equalization also has general information for property owners affected by the fires and other disasters that may be eligible for property tax relief, go to: www.boe.ca.gov/proptaxes/disaster-relief.htm
State Treasurer Fiona Ma has also put together a list of helpful links for victims of wildfires and other natural disasters: https://www.treasurer.ca.gov/STO-Wildfire-Recovery-Resources-Guide.pdf
And finally, good news for everyone who resides or has a business in L.A. County: the deadline to file and pay federal and state income taxes, including estimated taxes, has been extended to October 15.
Jon Coupal is president of the Howard Jarvis Taxpayers Association