Proposition 13 generally bases California property taxes on a property's value when acquired, not its current market value. The tax is calculated by multiplying the county assessor's enrolled assessed value by 1 percent, then adding authorized rates for specified voter-approved bond debt. California voters approved Proposition 13 on June 6, 1978. It created an acquisition-value system that limits assessment growth while the same owner keeps the property.
Table of Contents
- How the assessed value changes each year
- How to calculate the basic tax
- When ownership changes
- What happens after new construction
- When market value falls
How the assessed value changes each year
When property is purchased, changes ownership, or is newly constructed, the county assessor generally establishes a base-year value. This starting value usually reflects the property's market value at that time, according to the California State Board of Equalization's assessment guidance.
Afterward, the property's factored base-year value generally may increase by no more than the lower of: Market appreciation alone does not reset the assessment for a continuing owner. This means assessed value may remain far below market value after many years of rising prices.
- The change in the California Consumer Price Index
- 2 percent
How to calculate the basic tax
Start with the assessed value shown on the county assessment roll. Multiply that amount by 1 percent, then apply any authorized rates for specified voter-approved bonded indebtedness. For example, an assessed value of $500,000 produces a basic 1-percent tax of $5,000.
The final amount attributable to the property-tax rate would be higher where authorized bond rates apply. The State Board of Equalization describes this calculation in Publication 29 on Proposition 13. The calculation ordinarily does not begin with an estimate of what the home could sell for today. It begins with the assessor's enrolled value, which may reflect an older purchase price adjusted under Proposition 13.
When ownership changes
A sale, gift, inheritance, or another transfer of present beneficial ownership can trigger reassessment. Unless an exclusion applies, the assessor establishes fair market value as of the transfer date. A normal home purchase generally results in reassessment of the entire property.
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The State Board of Equalization's change-in-ownership FAQ explains that some transfers may qualify for statutory exclusions, so the legal form and circumstances of a transfer matter. Before relying on an existing owner's tax bill, a buyer should account for possible reassessment. That bill may be based on a much older acquisition value and may not represent the buyer's future assessment.
What happens after new construction
Completing assessable new construction creates a market-value assessment for the added construction. The assessor adds that amount to the property's existing assessment.
The project does not, by itself, reset the base-year value of all pre-existing land and improvements. For example, adding an assessable improvement can increase the assessment for that addition while leaving the older assessed components in place.
When market value falls
If a property's January 1 market value falls below its factored base-year value, Proposition 8 requires the assessor to enroll the lower market value. This produces a temporary decline-in-value assessment rather than a new permanent base year. The normal 2-percent limit does not control annual increases while that reduced assessment recovers.
According to the State Board of Equalization's decline-in-value guidance, the assessment may rise by more than 2 percent, but it cannot exceed the factored base-year value without an ownership change or new construction. This system also explains why similar neighboring homes can have sharply different assessments. Where market values have risen, a longtime owner will generally owe less than a recent buyer whose property was reassessed at acquisition.
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