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‘Tis the season to complain about taxes (or if not now, soon enough). But before you start grumbling about all the money you’ll owe the IRS, find some solace in the fact that some people owe a whole lot more. Especially celebrities!
Case in point: According to the Los Angeles Times, which analyzed more than 2.4 million assessor records in the area, Beyoncé and JAY Z reportedly owe $1.05 million per year in property taxes alone on their Bel Air mansion.
Granted, these music moguls bought this 30,000-square-foot, eight-bedroom, 11-bath estate on 2 acres in 2017 for a whopping $88 million. With a purchase price this high, is $1 million in property taxes all that shocking? It’s certainly not an area outlier by any means. In fact, the Times article featured a total of 11 L.A. homes with property taxes above the $1 million mark, with this superstar couple’s home coming in at No. 8.
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Meanwhile, the nearby 20,000-square-foot former Playboy mansion in Holmby Hills has even higher property taxes ($1.22 million), and the highest property taxes of all ($1.36 million) belongs to a 38,000-square-foot, 12-bedroom, 21-bath manse owned by real estate entrepreneur Bruce Makowsky.
Overall, California homeowners pay $1,450.91 per capita in taxes per year—which is a far cry from a million-plus. Nonetheless, JAY Z and Beyoncé’s property taxes do contain some pearls of wisdom for us regular folks, and how to avoid a similar fate come tax time.
How property tax is calculated
While home buyers often obsess over the price they pay for a house, they often forget to factor in (at least initially) property taxes. And since property taxes are often folded into mortgage payments, it’s not always clear how much people owe, or how property taxes are calculated at all.
For instance, while many assume property tax is based on a home’s market value, it’s actually derived on a different figure: a home’s assessed value.
“Many people don’t realize that the assessed value on which property tax is calculated is typically not the same as the market value of the property,” explains Andrew Latham, managing editor of Supermoney.com. “Generally, the assessed value is lower, which is a good thing for property owners.
“However, that’s not the case with Beyoncé and JAY Z,” he adds. “If you check the L.A. County Assessor Portal, you can see that JAY Z and Beyoncé’s property is assessed at $89.8 million, which is the purchase price plus 2%.”
Essentially, Beyoncé and JAY Z may have gotten a deal, relatively speaking, buying the house for $88 million, but they’re paying taxes on $89.9 million.
Latham also points out that because this power couple bought this house recently, they’re going to be paying a lot more than if they had bought decades earlier.
The reason? California’s Proposition 13 (or the People’s Initiative to Limit Property Taxation) limits how high property tax can go while an owner is living in a home.
“The spirit of the law was to prevent seniors from being forced out of their homes by rapidly escalating property taxes,” says Michael Dinich of Your Money Geek. “With this bill, homeowners who purchased properties in the 1950s as young couples can still afford their property taxes in retirement.”
That’s good news for people who’ve lived in their house a long time—but a curse to people who’ve just moved to the area.
“In Los Angeles County—since Proposition 13 passed in 1978—the base value of a property is assessed at the date of purchase with a maximum taxable value increase of 2% per year,” Latham says. “This means people who bought a property in L.A. many years ago will usually pay much less in property tax than new home buyers who just bought a comparable property in the same neighborhood.”
How to avoid high property taxes
Property taxes may be a fact of life, but since they can amount to a serious chunk of change, it’s worthwhile for home buyers to factor property taxes into their decision on where to live.
“When people buy a home, they should consider not only the monthly mortgage payment owed but also other expenses such as property taxes, homeowners association fees, utilities, landscaping, and repairs,” explains Laura Fogel, a certified public accountant at Gonzalez and Associates. “It is important to have an accurate picture of what these monthly expenses will be and whether this home is truly affordable.”
Wondering how much property tax you’d pay on a home?
You can calculate your own property taxes, but usually, you won’t have to. You can usually find the exact amount (or at least a ballpark estimate) on a home’s listing on realtor.com®, or you can enter the home’s location and price into an online home affordability calculator.
Savvy home buyers should also know that property taxes can go up. You might buy a house in an up-and-coming area, and, after a few years, the area improves and your property taxes skyrocket. Or, you might spend a big chunk of your savings on home improvements, and find those improvements boost the assessed value—and your property taxes. However, there are ways to fight higher taxes, too.
“Many homeowners don’t know that the assessed value of your home is not set in stone,” says Latham. “For example, you can influence the assessed value of your home by limiting additions that will expand the built area on a property. You can also appeal your property’s assessed value if you think it’s too high. If you fall into a protected category, such as seniors, veterans, disabled people, and farmers, you can qualify for exemptions.”
The post Beyonce and JAY Z’s Property Taxes Are So High, They Boggle the Mind appeared first on Real Estate News & Insights | realtor.com®.
source https://www.realtor.com/news/trends/beyonce-and-jay-zs-property-taxes-are-so-high/
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