All San Francisco homeowners should be aware that the second installment of their annual property taxes will be coming due over the next couple of months. Just as the first installment became due in November (and overdue in December) the second San Francisco property tax installment comes due on February 1st 2018, and will be considered delinquent after April 10th 2018.
By now you should have already received your bill, but in case it still hasn’t come to you, your first and best recourse is to contact the Tax Collector through the SFGOV Property Tax Site. Note also that any very recently acquired property may be included on a secondary bill, to be paid alongside your primary one.
When we reported last autumn that the first installment was coming due, we also addressed concerns about the increases to the property tax rate in San Francisco, sometimes over and above the annual increase (capped at 2% per annum or the rate of inflation) allowed by 1978’s Proposition 13. For instance, an extra 0.008% percent increase in September of 2016.
San Francisco Property Tax and the Real Estate Market
The reality of it is that, while taxes are indeed going up, they are going up more slowly than market value, so property owners still end up with consistent gains year over year. In fact, the San Francisco real estate market is absolutely thriving! When you consider property as an investment, the taxes are downright conservative.
Here’s how that works: San Francisco property tax is counted against the base value of the initial purchase price. The annual increase is mostly meant to offset currency inflation, not to keep lockstep with the changes in market value. Since the San Francisco real estate market is so healthy, the increase to property value year over year is significantly higher than 2% of the initial purchase price.
The smartest way to make the most of your investment, then, is to buy the most expensive property you can safely afford, as soon as possible. The sooner you lock in that initial base value, the lower your taxes will be for a given property. If you buy a house today, the taxes you pay on that house in 2025 will be calculated on today’s market price. If you wait, and buy that same house in 2020, at a higher market value, then the taxes you pay in 2025 will be much higher. Dollar for dollar, you’ll pay more in tax the longer you wait to buy.
That brings us to another quick note about taxes and real estate. When you eventually sell your San Francisco property, you’ll be selling it at a considerable profit (the extra cash in your pocket, when you subtract your initial purchase price from your ultimate sale price – the return on your investment.) If you’ve lived in a home for more than two years, you’ll be eligible for a capital gains exemption of a quarter million, or half a million for a married couple or family) but many homes are sold for considerably more than $500,000 over their initial purchase price. In that case, your realtor will be able to help you navigate any tax-related complications you encounter.
When it comes to your annual property tax, you should be treating it as a weekly or monthly expense (like a part of your mortgage payment) to avoid year-end surprises. You can calculate your annual amount, divide it into weekly installments, and squirrel those away through the year so you’ll have the full amounts at the ready come tax season.
If you haven’t already got your San Francisco property tax bill in hand, you can get one, and you can pay them online through that same portal.
As you consider the value of your property, or the tax implications of making a move sooner rather than later, please give Danielle Lazier + Associates a call! Our team is ready to help!