There is no sales tax when buying a house in California. The state’s sales tax reaches only tangible personal property, and real estate falls outside that category entirely.1California Legislative Information. California Revenue and Taxation Code 6051 Whether the purchase price is $400,000 or $4 million, none of it goes to California sales tax. That said, the transaction is far from tax-free. A documentary transfer tax is collected when the deed records, property taxes begin the day you take title, and a supplemental bill will arrive in your mailbox a few months later that your lender will not pay for you.
One narrow exception is worth knowing. If your purchase contract itemizes freestanding personal property such as a washer and dryer, loose furniture, or artwork, and assigns those items a separate dollar value, that portion is technically subject to sales tax. Most contracts either exclude personal property or assign it a nominal figure, so in practice this rarely produces a meaningful bill.
The Documentary Transfer Tax
The tax that does apply at closing is the documentary transfer tax. Under state law, every county can charge $0.55 for each $500 of value transferred, which comes out to $1.10 per $1,000.2California Legislative Information. California Revenue and Taxation Code 11911 On an $800,000 home, the county share is $880.3San Mateo County Assessor-County Clerk-Recorder & Elections. Documentary Transfer Tax Cities within a county can add their own transfer tax at half the county rate, with a credit against the county tax to prevent double taxation. The seller traditionally pays this tax, though it is negotiable in the purchase contract.
Charter City Transfer Taxes
Charter cities set their own rules, and several charge far more than the state formula. Los Angeles charges $4.50 per $1,000 on properties up to $5.3 million. Above that, Measure ULA imposes a 4% transfer tax on sales between $5.3 million and $10.6 million, and 5.5% on sales at or above $10.6 million.4City of Los Angeles Office of Finance. Real Property Transfer Tax and Measure ULA FAQ A $6 million Los Angeles sale carries $240,000 in city transfer tax on its own.
Oakland uses a tiered schedule that runs from $10 per $1,000 on properties under $300,000 up to $25 per $1,000 on sales above $5 million. San Francisco starts at about $5 per $1,000 for sales over $100,000 and climbs to $30 per $1,000 on transactions above $25 million.5City and County of San Francisco. Transfer Tax Before you finalize a budget, check whether the city you are buying in has its own transfer tax schedule.
Property Taxes After You Close
You owe property taxes the moment you take ownership. Proposition 13 caps the base rate at 1% of assessed value, with voter-approved additions for school bonds and other local projects layered on top.6California State Board of Equalization. California Property Tax – An Overview Total rates in most counties land between 1.1% and 1.3%.
Your purchase triggers a reassessment to current market value, which becomes your new base year value. From that point forward, the assessed value can rise by no more than 2% per year regardless of what happens in the market.7Los Angeles County Assessor. Proposition 13 This is why long-time owners in the same neighborhood often pay a fraction of what a new buyer owes on an identical home.
Bills come in two installments. The first is due November 1 and becomes delinquent after December 10. The second is due February 1 and becomes delinquent after April 10.8California Tax Service Center. Property Tax Function Important Dates At closing, you will pay a prorated share of the current year’s bill covering the period from your purchase date through the end of that billing cycle.
The Supplemental Tax Bill Your Lender Won’t Pay
Because your purchase triggers a reassessment mid-year, the county issues a separate supplemental tax bill covering the difference between the seller’s old assessed value and your new purchase price for the remainder of the fiscal year. This bill is in addition to the regular annual property tax bill and is not credited against it.9California State Board of Equalization. Supplemental Assessment
The amount is prorated by how many months remain in the fiscal year, which runs July 1 through June 30, after your purchase closes. A buyer who closes in August owes roughly 11/12 of the full difference. A buyer who closes in May owes only 2/12, but then receives a second supplemental bill covering the entire next fiscal year.10California Legislative Information. California Revenue and Taxation Code 75.11 Purchases between January and May generate two supplemental bills; purchases between June and December generate one.
The critical piece: your mortgage lender does not receive supplemental bills, even if it handles your regular property tax payments through an impound account. The county sends the supplemental bill directly to you, and penalties for missing the payment because you assumed the lender was handling it cannot be excused.9California State Board of Equalization. Supplemental Assessment Watch your mail in the months after closing.
Mello-Roos Special Taxes
If your home sits in a newer development or a master-planned community, it may be inside a Mello-Roos Community Facilities District. Property owners in a defined area impose a special tax on themselves to fund roads, schools, water systems, and parks, and the tax passes to future owners on sale.11Southern California Association of Governments. Mello-Roos Community Facilities District
Mello-Roos is not based on property value. Districts calculate the tax using lot size, square footage, bedroom count, or other formulas. Annual amounts range from a few hundred dollars in older neighborhoods to several thousand in newer developments still paying off infrastructure bonds. The tax appears as a line item on your annual property tax bill.
Sellers of one-to-four-unit residential properties in a Mello-Roos district must disclose the special tax before the sale closes.12California Department of Real Estate. Disclosures in Real Property Transactions – RE 6 Confirm the disclosure is in your file and that you understand the annual cost before you commit.
Claiming the Homeowner’s Exemption
California reduces the assessed value of an owner-occupied home by $7,000. At a 1% base rate, that saves $70 a year. It is not a large sum, but it is money left on the table if you do not file. Submit a one-time claim on form BOE-266 with your county assessor, and file by February 15 to receive the full exemption for that tax year.13California State Board of Equalization. Homeowners’ Exemption
If Your Seller Is a Foreign Person
When the seller is a foreign person or entity, the Foreign Investment in Real Property Tax Act makes the buyer the withholding agent. You are responsible for withholding 15% of the gross sales price and remitting it to the IRS.14Internal Revenue Service. Definitions of Terms and Procedures Unique to FIRPTA If you fail to withhold and the seller does not pay the resulting tax, the IRS can pursue you for the amount.
Reduced withholding or an exemption may be available when the property will be your primary residence and the sale price falls below certain thresholds. Your escrow company should flag a FIRPTA situation, but confirm with a real estate attorney if there is any doubt about the seller’s status.