Prop 13 and Prop 19: What Actually Happens to Your Property Tax

California does not tax your home on what it is worth today. It taxes it on a base year value that moves far more slowly than the market. Two ballot measures — Proposition 13 in 1978 and Proposition 19 in 2020 — set the rules, and your county assessor applies them.

Proposition 13: the 1% rate and the 2% cap

Proposition 13 does two things. It limits the property tax rate to one percent of assessed value, plus whatever rate is needed to fund local voter-approved bonded indebtedness. And it caps the annual increase in a property’s assessed value at no more than two percent per year.

That second limit is why two identical houses on the same street can have very different tax bills. The one bought decades ago carries a low base year value that has crept up by at most 2 percent a year; the one bought last year was reassessed at its purchase price.

What resets the value

The base year value is not permanent. A change in ownership or new construction causes the affected property to be reassessed at current market value, establishing a new base year value from which the 2 percent cap starts again.

When the market falls: Proposition 8

If market value drops below the factored base year value, Proposition 8 allows a temporary reduction to that lower market value. Property in that status is not limited to 2 percent increases — it can rise faster year to year as the market recovers, up until it reaches the factored base year value, at which point the ordinary Proposition 13 cap resumes. Your county assessor reviews these; you can ask for a decline-in-value review.

Proposition 19, part one: taking your base year value with you

Effective April 1, 2021, homeowners who are 55 or older, severely and permanently disabled, or victims of a wildfire or natural disaster can transfer the base year value of a home they sell to a replacement home. Proposition 19 widened this considerably: the transfer can be to a replacement anywhere in California, and it can be used up to three times, where the old rules generally allowed one and largely confined it to the same county.

If the replacement home costs more than the one sold, the difference is added to the transferred base year value — so the tax goes up, but only by that difference rather than being reset to the full purchase price.

Proposition 19, part two: inheriting a home

This is the half that took something away. Effective February 16, 2021, the parent-child and grandparent-grandchild exclusion applies only where the property is a family home that is the principal residence of both the person transferring it and the person receiving it (or a family farm). The prior rule that let up to $1 million of other real property pass without reassessment is gone.

Even where it applies, the exclusion is capped: the excluded amount is the transferred base year value plus $1,000,000, a figure adjusted every two years. Value above that cap is added to the taxable value. An inherited house that nobody moves into is reassessed at market value.

Where to check your own numbers

Assessment is a county function. Your county assessor holds your base year value, your current assessed value, and the exemption claims on file, and is the office that processes a decline-in-value review or a Proposition 19 claim. The Board of Equalization publishes the statewide rules the assessors apply.

Values, caps and the biennial Proposition 19 adjustment change over time. Check with your county assessor for the figures on your property.