Owners of some beautiful old ornate lofts may save many thousands of dollars per year on property taxes. #millsact #california #rules
The Mills Act is a California state law allowing cities such as Los Angeles to enter into contracts with the owners of historic structures to provide a reduction of property taxes in exchange for the continued preservation of the property. Property owners usually report significant tax savings, often around 63%. | Mills Act Recently Sold
- The city must designate the building as a Landmark, Structure of Merit; or the building must be in a Historic District. | APPLICATION
- Condo associations negotiate with the city.
- Building must maintain original architecture, especially the look of the exterior facade, doors and windows.
- Each building must create a separate contract with the city, which are automatically renewed each year after 10 years. The city or owner may decide not to renew. | VIDEO
VALUATION RULES FOR MILLS ACT PROPERTY TAX BENEFITS
Property taxes are recalculated using a complicated formula with valuation determined by the “income” method in Revenue and Taxation Code, Section 439.21. The income projected for owner- occupied property is based on comparable rents for similar property in the area or, if sufficient rental information is available, the income that it could reasonably be expected to produce under prudent management. In the case of income producing property, the income amount is based on rent actually received and on typical rents received for similar properties having similar uses. The capitalization rate for both owner- occupied and income property is determined by adding together an interest component, a historic property risk component, an amortization component, and a property tax component. Below is a hypothetical example of how the Mills Act allows a $500,000 loft to be taxed as if it were only a $181,552 property.
Example Property Tax Calculation
Current assessed valuation $500,000
Current taxes $ 6,250 ($500,000 x 0.0125)
Recalculation Using Mills Act Assessment Method:
Gross income $ 28,800 ($ 2,400 X 12 mo.)
Less expenses $4,000 (insurance, repairs, utilities)
Net income $24,800
Capitalization rate 13.66% (Interest component at 6.75%; Historic property risk component at 4%; Amortization component at 1.67% Property tax component at 1.24%) [These rates are approximated, and subject to change]
New valuation $181,552
For more information, visit www.MillsActLA.com
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Copyright © This free information provided courtesy L.A. Loft Blog and LAcondoInfo.com with information provided by Corey Chambers, Realty Source Inc, BRE#01889449 We are not associated with the homeowner’s association or developer. For more information, contact (213) 880-9910 or visit LAcondoInfo.com Licensed in California. All information provided is deemed reliable but is not guaranteed and should be independently verified. Mills Act rates and calculation methods are approximations, subject to change. Properties subject to prior sale or rental. This is not a solicitation if buyer or seller is already under contract with another broker.