The devastating California wildfires have left entire neighborhoods in ruins, displacing hundreds of thousands of residents and raising many difficult questions along the way. Among them: What happens to property taxes when a home is damaged or destroyed?
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For many homeowners, this is a situation they’ve never faced before. Property taxes are based on the assessed value of a home, but what happens if that home is gone?
Property Taxes and Natural Disasters
In the case of wildfires, hurricanes, floods or other catastrophic events, property destruction doesn’t automatically erase the obligation to pay property taxes, but relief measures are usually available. The Federal Disaster Tax Relief Act of 2023, for example, includes provisions for taxpayers affected by wildfires, offering tax extensions and even adjustments to tax liabilities in some cases.
Los Angeles resident and realtor Jennifer Hawkins explained that homes impacted by disasters will likely have their property taxes reduced to reflect the lower assessed value.
“Homeowners will see their property taxes adjusted downwards — sometimes by a couple of hundred dollars per year — until rebuilding is complete,” she said. “Once the new home is finished, the property will be reassessed and a new payment plan will be based on its updated value.”
When a property is damaged or destroyed, whether at the state or local level, most jurisdictions will reassess the property’s value based on its new condition. This reassessment may lower the property’s value, which leads to a lower tax bill. It’s a short-term relief measure, though. Once the property is rebuilt, a new assessment will take place and the property tax will be adjusted accordingly.
In addition, when an area receives a Major Disaster Declaration from a president additional tax deductions become available to help cover losses.
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Though the next property tax installment was due Feb. 1, with payments becoming delinquent after April 10, both the IRS and California Franchise Tax Board have postponed the deadlines for filing tax returns and making payments. Affected residents and businesses now have until Oct. 15.
“In the meantime, homeowners should visit the Assessor’s website to review the ‘Misfortune and Calamity‘ section and complete the necessary forms to initiate the process for property tax adjustments,” Hawkins added.
What About Mortgage Payments?
In the case of any disaster, it’s important that homeowners continue to make mortgage payments while they wait for news of any insurance claims or tax relief. Mortgage companies may offer temporary relief in the form of forbearance programs, but this will always be down to the individual lender.
“Some lenders might offer forbearance programs, but this varies by company,” said Hawkins. “It’s critical to call the contact number on the latest mortgage statement to ask if relief options are available.”
A Long Road Ahead
Disasters like wildfires are devastating, and while property taxes may be the last thing on many people’s minds, understanding how they work during a crisis is crucial. Fortunately, both federal and state governments offer relief through tax extensions, reassessments and payment reductions to help ease the financial burden during recovery. Those impacted by the California wildfires, or similar events, should stay updated on announcements from local authorities and use available programs to help manage the financial strain.
“The most important thing is to keep asking questions, file the necessary forms and stay on top of all deadlines,” said Hawkins. “The road to recovery will take time, but resources are available to help lighten the load.”
This article originally appeared on GOBankingRates.com: Do You Still Have to Pay Property Taxes If Your Home Is Destroyed?
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