Understanding California Property Taxes: Proposition 13 and Reassessment

Property taxes are one of the largest ongoing costs of owning a home in California, and the rules that determine them are different from those in many other states. Proposition 13, approved by voters in 1978, shaped how property is assessed and taxed. Knowing the basics can help buyers estimate their costs and help owners understand their bills.

The Basic Formula

Under Proposition 13, the general property tax rate is limited to one percent of a property's assessed value, plus additional amounts for voter-approved local bonds, special assessments and fees. As a result, the total rate on a tax bill is usually somewhat above one percent and varies by location.

How Assessed Value Works

A property's assessed value generally starts with its purchase price, known as the base year value. After that, the assessed value can increase by no more than two percent per year, or by the rate of inflation if lower, even if the market value rises faster. This feature gives owners predictability, but it also means that two similar homes can have very different tax bills depending on when they were purchased.

What Triggers Reassessment

• Change in ownership. When property is sold or otherwise transferred, it is generally reassessed to current market value, although exclusions exist.
• New construction. Completed additions or new buildings are assessed at their new value, which is added to the existing base.

Not every transfer leads to a higher assessment. Certain transfers between spouses and some transfers between parents and children, as well as transfers to grandchildren in specific circumstances, may qualify for exclusions under state law and subsequent changes. These rules are detailed and have changed over time, so check with the county assessor for current requirements and filing deadlines.

Supplemental Tax Bills

When a property changes ownership or new construction is completed, the county assessor determines the new value and may issue a supplemental tax bill covering the difference between the old and the new assessment for the remaining part of the fiscal year. Buyers should expect that bill separately from the regular annual bill and should plan for it in their budget.

Exemptions and Reductions

• The homeowners' exemption reduces the assessed value of an owner-occupied primary residence by a fixed amount, and owners must file a claim.
• Veterans and disabled veterans may qualify for exemptions, subject to eligibility rules.
• If market values fall below the assessed value, a temporary decline-in-value reduction may be available, and owners can request a review from the county assessor.

Paying the Bill

Property taxes are generally paid in two installments, due in the late fall and the early spring, with penalties applied after the deadline. Many homeowners pay through an escrow account managed by their mortgage servicer. The county tax collector's website provides bill details and payment options.

Check Your Bill

Review your assessment notice and tax bill each year. Verify that the property description and exemptions are accurate and that any special assessments are legitimate. If you believe the assessed value is incorrect, you can contact the assessor or file an appeal within the deadline.

This article is general information and is not tax or legal advice. Contact your county assessor or a qualified professional for guidance on your property.