Property taxes have long been a sticking point for people who own homes in California. Owning a home is not cheap. However, many property owners are discovering the benefits of a nice tax loophole known as Proposition 13.
Prop 13 places a cap of just 1 percent of the home’s value, based on when the home was purchased. Prop 13 has been around since 1978. It was created to help home buyers as the price of homes increased dramatically. The measure was later extended to protect inherited property, as well.
So what’s the problem with Prop 13? It turns out that many homeowners in California are renting their inherited homes for thousands of dollars a month and using the money to cover their property taxes.
In fact, according to report in the L.A. Times, 63 percent of residents in Los Angeles County alone who have inherited such properties are renting these homes.
Opponents say the loophole has robbed billions of dollars of revenue from cities, counties and school districts. In fact, according to the state’s non-partisan Legislative Analyst Office, it’s estimated that nearly $1.5 billion in tax revenue has been lost.
However, Prop 13 remains popular. In fact, close to 65 percent of voters still support it, which means it won’t likely be going anywhere at least for the near future.