Proposition 13 established the concepts of a base year value for property tax assessments, and limitations on the tax rate and assessment increase for real property. Passed by voters in June 1978, Prop 13 is an amendment to the California Constitution
How Proposition 13 Works
Proposition 13 provides three very important functions in property tax assessments in California. Under Prop 13, all real property has established base year values, a restricted rate of increase on assessments of no greater than 2% each year, and a limit on property taxes to 1% of the assessed value (plus additional voter-approved taxes).
Understanding Base Year Values
Once Proposition 13 passed, property assessments for the 1978-79 fiscal year were required to be “rolled back” to 1975-76 values, establishing the first base year values in California. Properties that have not sold or undergone new construction since February 1975 are said to have a 1975 base year value.
When a change in ownership occurs, whether full or partial, real property is re-assessed at its current market value as of the date of transfer. This establishes a new base year value for both the property’s land and improvements. If only a partial change in ownership occurs, the original base year value is retained for the part of ownership that does not change, and a new base year value is created for only the part of ownership that has changed.
When new construction occurs, it is re-assessed at current market value as of the date of completion. This establishes a new base year value for the property’s newly constructed improvements only. If construction is deemed new or substantially equivalent to new, the base year value for improvements is established entirely on the date of construction completion. If construction is deemed an addition, the original base year value for improvements remains and a new base year value on the date of construction completion is added. The base year for land is unchanged by new construction.
Business Personal Property, boats, airplanes and certain restricted properties are subject to annual reappraisal and assessment.
Understanding Rate of Increase Limits
The assessed value of a property is limited to an increase no greater than 2% each year unless a change in ownership or new construction occurs. The 2% increase is originally applied to the base year value, and is thus referred to as the factored base year value. In the case of real property, the factored base year value is the upper limit for property tax purposes. The maximum 2% increase per year continues to be applied until a change in ownership or new construction occurs, even if a temporarily reduced value has been put on the roll under Proposition 8.
Understanding Property Tax Limits
Under Proposition 13, property taxes are limited to one percent of the assessed value. Additional property taxes may be approved for schools or local projects, which can vary amongst communities and bring the tax rate higher than one percent. These additional property taxes change annually and are determined by voters in each tax rate area.
Why Am I Paying More Taxes Than My Neighbor?
Historically, market values of real property have increased at a significantly greater rate than factored base year values. Because of this, a widening disparity between market values and assessed values has emerged in Santa Clara County.
A property purchased in 1980 with changes in ownership or new construction will usually have a much lower assessed value than a property with similar characteristics purchased in 2011.
For example,Buyer A neighbor bought a property in Year 1 for $100,000 (base year value). By Year 6, that property would have a factored base year value of $110, 408. Buyer B bought a similar property in Year 6 for. $150,000. The market value of both properties is $150,000, but the taxable assessed value of Buyer A’s property purchased in Year 1 is $110,408 while that of Buyer B’s property purchased in Year 6 is $150,000. The factored base year value of the property purchased in Year 1 is not indicative of the market value of the similar property purchased in Year 6.
Video: The Block That Prop 13 Built
FAQs
Proposition 13 allows a transfer of primary resident between parent and child without reassessing the tax base of the home. To get the benefit, you filed the appropriate form with your county assessor's office after you prepared and filed the deed transferring the property from a parent to a child.
What did Proposition 13 mean to homeowners? ›
Proposition 13 (or "Prop. 13") rolled back most local real estate assessments to 1975 market value levels, limited the property tax rate to 1 percent plus the rate necessary to fund local voter-approved bonded indebtedness, and limited future property tax increases to a maximum of 2% per year.
What triggers a Prop 13 reassessment? ›
Properties would be fully reassessed in value only when a change of ownership occurs either by death, gift, or sale. In other words, when the property is “transferred,” or what the California State Board of Equalization calls a “change in ownership.”
What is the maximum tax increase for Prop 13? ›
California's Proposition 13 caps the growth of a property's assessed value at no more than 2 percent a year unless the market value of a property falls lower.
What is Prop 13 simplified? ›
In 1978, the California Constitution was amended by the voters to restrict increases of property taxes. Proposition 13 requires assessment of each taxable property based on its fair market value and limits a property owner's general levy tax to 1 percent of the assessed value.
What is the maximum property tax increase in California? ›
The assessed value of a property is limited to an increase no greater than 2% each year unless a change in ownership or new construction occurs. The 2% increase is originally applied to the base year value, and is thus referred to as the factored base year value.
Who benefits the most from Prop. 13? ›
High–Income Homeowners, Therefore, Receive the Greatest Dollar Amount of Tax Relief. Because higher–income households own more, higher–value homes and Proposition 13 tax relief is proportionate to home wealth, the majority of Proposition 13 tax relief (in dollar terms) goes to higher–income households.
Does Prop. 13 pass to heirs? ›
How Does Prop 13 Works? When a person dies, and a child inherits the home, the low valuation of the real property can remain intact with the child; provided that, the child files a parent-to-child exclusion form. You see, Proposition 13 allows a child to keep the parent's tax value of the home.
Did Prop. 13 freeze property taxes? ›
The proposition decreased property taxes by assessing values at their 1976 value and restricted annual increases of assessed value to an inflation factor, not to exceed 2% per year. It prohibits reassessment of a new base year value except in cases of (a) change in ownership, or (b) completion of new construction.
How many times can you use Prop. 13 in California? ›
Severely and permanently disabled persons who meet certain specific requirements may transfer the base year value of their principal residence to a replacement dwelling of equal or lesser current market value in the same county. There is no age limit. This is a one-time only benefit.
Under Proposition 13, the property tax rate is fixed at 1% of assessed value plus any assessment bond approved by popular vote.
Do 65 year olds pay property taxes in California? ›
The State Controller's Property Tax Postponement Program allows homeowners who are seniors, are blind, or have a disability to defer current-year property taxes on their principal residence if they meet certain criteria, including at least 40 percent equity in the home and an annual household income of $49,017 or less ...
What is the Proposition 13 for dummies? ›
It caps the amount property taxes may increase each year. Prop 13 limits property taxes to 1% of the property's assessed value. The property's assessed value equals the property's base value (the property's value at the time of purchase), plus an inflation factor determined by California's consumer price index (CPI).
How to lower property taxes in California? ›
Lower My Property Taxes
- Decline In Value / Prop 8.
- Calamity / Property Destroyed.
- Disabled Veterans' Exemption.
- Homeowners' Exemption.
- Nonprofit Exemptions.
- Transfers Between Family Members.
- Transfer of Base Year Value to Replacement Dwelling.
- Assessment Appeal.
Before the proposition narrowly passed in 2020, parents could pass down their home and their very low property tax rate to their children. But Proposition 19 changed that. Now, the property's value gets reassessed at the time of transfer, and the property taxes could rise along with it.
What was the purpose of conservatives passing Proposition 13 in California? ›
Limit the tax rate for properties
Proposition 13 declared property taxes were to be assessed their 1976 value and restricted annual increases of the tax to an inflation factor, not to exceed 2% per year.
What is the Proposition 13 in math? ›
If a straight line stands on a straight line, then it makes either two right angles or angles whose sum equals two right angles. Let any straight line AB standing on the straight line CD make the angles CBA and ABD.
What is Proposition 13 Apush? ›
Under Proposition 13, property is assessed at market value for tax purposes only when it changes ownership. Increases in value are limited to an annual inflation factor of no more than two percent. 5. Vote requirement for state taxes.
What is Prop 13 Supreme Court? ›
Proposition 13 “contain[ed] four distinct elements”: (1) “a limitation on the tax rate applicable to real property”; (2) “a restriction on the assessed value of real property”; (3) a requirement of a two-thirds vote of the Legislature for any change in state tax law with the purpose of increasing revenues, along with a ...
