Plenty of tax benefits are available to rental property owners in San Francisco, and that’s good news. You’ll be able to recoup a lot of what you spend on things like maintenance, property management fees, and mortgage interest when you file your taxes. What you have to budget for, however, are the property taxes that you’re required to pay on any units, homes, or buildings that you’re renting out.
Property Taxes in San Francisco
The property tax rate in San Francisco is currently set at 1.17769382% for the fiscal year. The amount you pay in property taxes is based on your assessed property value, which is established by the Office of the Assessor-Recorder. You should receive your notice of assessed value in July. The Board of Supervisors approves the tax rates in September. You’ll receive your property tax bill by November 1, and you’ll have to pay the full tax bill or at least the initial installment by December 10. Your second installment will be due on April 10 of the following year.
Income Taxes for San Francisco Landlords
You’ll need to pay tax on any profit you earn from renting out a property. Rental income is money you receive for the occupancy of your real estate or for the use of personal property. Income will be any amount you receive from your tenants in monthly rent and any payments that are made by the tenant to you for circumstances such as the cancellation of a lease.
In California, rental income and losses are considered passive activities and that means you typically cannot use those passive activity losses to offset the income you earn from employment, self-employment, interest and dividends, or pensions and annuities. However, you can take advantage of two exceptions to this rule: the rental real estate loss allowance; and, the real estate professional status.
You can enjoy tax benefits that include:
- Property depreciation
- Interest deductions on borrowed capital
- Deferring capital gains when you exchange instead of sell properties
With depreciation deductions, a lot of property owners find that they can often turn the actual income into tax losses. Make sure you talk to a tax professional or an accounting expert who understands your unique tax situation and the benefits provided to rental property owners in San Francisco.
Rent Board Fees
It’s not a tax, per se, but you will have to pay a fee to the Rent Board for every rental property that you own in San Francisco. For the fiscal year 2023 – 2024, the amount is $59.00 per unit.
Chapter 37A of San Francisco’s Administrative code allows the city to collect this per-unit fee for each residential dwelling unit that is subject to the San Francisco Rent Ordinance. This fee goes towards the management costs incurred by the Rent Board, and it’s billed to San Francisco landlords each year on the property tax statement. You can collect a portion of the Rent Board fee from those tenants in occupancy as of November 1 of each year. A landlord is allowed to collect 50% of the cost of the fee from the tenant.
Prepare for these taxes, and contact us at Gordon Property Management if you have any questions about these taxes or your San Francisco property management requirements.
