How important is the business of real estate to CA budgets? Revenue generated from property ownership and the sale of real estate is used by Cities and Counties to fund schools, libraries, community resources, police and fire protection, emergency equipment, road work, public utilities and every government-backed service.
Property Taxes : A major source of revenue for local governments, CA property taxes raise over $60 Billion per year. Local governments levy property taxes on an owner based on the market value of their property, and are reassessed annually by the County Assessor. In the year a property is purchased, its taxable value is based on the sale price. While rates vary by County, a Buyer in LA can estimate their annual property taxes to be about 1.25% of the purchase price. Thereafter, annual property taxes collected are adjusted for inflation and typically increase up to 2%.
Transfer Taxes : Statewide, around $1 Billion is raised annually from transfer taxes. When every property is sold, a City and County transfer tax is collected based on a dollar value per every $1,000 of the sale price (SP). Example: City tax: L.A. and Culver City are $4.50/$1K; S.M. is $3.00/per $1K of the SP (Beverly Hills does not impose a City tax). County tax: LA County is $1.10/per $1K of the SP.
Personal Income Taxes : Annually, over $90 Billion is raised in personal income taxes. When a property is sold, any profit from selling real estate (capital gains) is taxable income for the coffers.

Inherited properties: Propositions 58 and 193 exempt 60,000 to 80,000 properties Statewide from annual reassessment, mostly in higher income areas. Today, most inherited properties are under Prop 13 when annual tax increases were capped at 2% based on 1974 market values. When a property is left to an owner’s off-spring, the low property tax follows ownership. Around two-thirds of these properties are not used as primary residences, rather rentals or vacation homes. A major loss of revenue to CA City and County budgets.