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ESTIMATED PROPERTY TAX ADJUSTMENT WORKSHEET GUIDE
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STEP 1: DETERMINE ANNUAL INCOME OF PROPERTY.
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DESCRIPTION
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CURRENT
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EXPLANATION
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1. Monthly Rental Income
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$
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Even if the property is owner-occupied, an estimated monthly rental income is needed as a basis for this formula. Remember to include all potential sources of income (i.e. filming, advertising, photo-shoots, etc.)
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2. Annual Rental Income
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$
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Multiply line 1 by 12 months
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STEP 2: CALCULATE ANNUAL OPERATING EXPENSES.
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3. Insurance
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$
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Fire, liability, and other insurance
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4. Utilities
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$
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Water, gas, electric
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5. Maintenance
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$
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Maintenance includes: painting, plumbing, electrical, gardening, cleaning, mechanical, heating repairs, structural repairs, and other repairs
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6. Management
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$
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Standard fee (usually 5% of rent)
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7. Other Operating Expenses
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$
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Security, etc. Provide breakdown on separate sheet
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8. Total Expenses
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$
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Add lines 3 through 7
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STEP 3: DETERMINE ANNUAL NET INCOME.
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9. Net Total
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$
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Line 2 minus line 8
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STEP 4: DETERMINE CAPITALIZATION RATE.
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10. Interest Component
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%
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As determined by the State Board of Equalization for 2012.
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11. Historic Property Risk Component
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%
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Single-family home = 4%
All other property = 2%
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12. Property Tax Component
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1%
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.01 times the assessment ratio of 100%
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13. Amortization Component
(reciprocal of life of property)
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%
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If the life of the improvement is 20 years, use 100% x 1/20 = 5%. Wood-frame typically 20 years, masonry typically 50 years
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14. Total = Capitalization Rate
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%
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Add lines 10 through 13
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STEP 5: CALCULATE NEW ASSESSED VALUE.
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15. Mills Act Assessed Value
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$
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Line 9 divided by line 14
Example: line 9 divided by .15 (15%)
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STEP 6: DETERMINE ESTIMATED TAX REDUCTION.
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16. Current Tax
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$
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General tax levy only, do not include voted indebtedness or other direct assessments
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17. Tax under Mills Act
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$
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Line 15 multiplied by .01
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18. Estimated Tax Reduction
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$
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Line 16 minus 17
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