Property Taxes

Property Taxes ## Overview of California Property Taxes California's property tax system is uniquely shaped by two landmark voter initiatives: Proposition 13 (1978) and Proposition 19 (2021). Understanding both is essential for the CA real estate license exam and for advising buyers and sellers effectively. --- ## Proposition 13 (1978) Proposition 13 was a constitutional amendment (Article XIII A) passed by California voters in June 1978. It fundamentally restructured property taxation in the state: Key provisions: 1. Property tax rate cap: Property taxes cannot exceed 1% of the assessed value per year (plus any voter-approved bonds or special assessments, which can add 0.1–0.5% or more) 2. Assessment base year: When Proposition 13 passed, properties were assessed at their 1975 fair market value. For new purchases, the base year value is set at the purchase price at the time of acquisition 3. Annual increase cap: The assessed value can increase by no more than 2% per year or the rate of inflation (as measured by the California Consumer Price Index), whichever is less 4. Reassessment triggers: The assessed value is only reassessed to current market value upon: - A change of ownership (sale, gift, inheritance with some exceptions) - New construction (only the new construction portion is reassessed; existing structure retains its base year value) Example: A homeowner purchased a home in 1990 for $300,000. Under Prop 13, the assessed value started at $300,000 and grew at a maximum of 2% per year. In 2025 (35 years later), the assessed value might be approximately $600,000 even if the market value is $2,000,000. Annual tax: $600,000 × 1% = $6,000. Without Prop 13, the tax on the market value would be…