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California Property Tax Rates and How Proposition 13 Works

Under Proposition 13 (California Constitution Article XIIIA), property is assessed at its purchase price (called the “base year value”) and 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 lower. The base property tax rate is capped at 1% of assessed value statewide. Local bonds, Mello-Roos Community Facility Districts, and special assessments are added on top of the 1% base and can add anywhere from 0.10% to 0.50% or more in newer master-planned communities.

When a property is sold, it is reassessed to its current market value, which becomes the new base year value for the buyer. This “change in ownership” reassessment is the mechanism by which long-term owners benefit substantially from Prop 13 while new buyers pay taxes on the full current price. In high-appreciation markets like San Francisco and Los Angeles, the difference between a long-term owner’s taxable value and current market value can be enormous.

The statewide effective rate of 0.73% reflects this Prop 13 dynamic: it measures actual taxes paid as a percentage of current market value. Because many owners are taxed on assessed values far below market value, the effective rate is well below the nominal 1% base rate. New buyers in California will often face an effective rate closer to 1.1% to 1.3% once all special assessments and bonds are included.

Estimates use 0.73% statewide effective rate. U.S. average uses 0.90%. Does not include Mello-Roos or bond assessments. Source: est., Tax Foundation / Census ACS 2023.

California Property Tax Assessment System and Proposition 13 Protections

Each of California’s 58 counties has a County Assessor who is responsible for assigning assessed values. Under Prop 13, properties are assessed at their “base year value,” which is the purchase price (or fair market value at time of transfer), and this value can only increase by up to 2% per year. Assessors reassess properties to market value only upon a “change in ownership” or completion of “new construction.” Unlike Texas and most other states, California does not conduct blanket annual market-value reassessments.

When the market declines, California law (Proposition 8, 1978) allows a temporary reduction in assessed value below the Prop 13 base when market value falls below the current assessed value. This “decline-in-value” review is triggered automatically by the assessor or can be requested by the property owner. Once the market recovers, the assessed value is restored toward the Prop 13 cap, but it can never exceed the original Prop 13 cap value (as adjusted by the 2% annual limit).

New buyers should be aware that supplemental tax bills are issued after purchase to capture the difference between the prior owner’s assessed value and the new purchase price, prorated for the portion of the fiscal year remaining. This supplemental bill is separate from and in addition to the regular annual tax bill and can be a significant surprise expense in the first year of ownership.

Recent California Property Tax Law Changes and 2025-2026 Outlook

The most significant recent change was Proposition 19 (2021), which restructured the rules for intergenerational property transfers. The California Legislative Analyst’s Office estimates Prop 19 increased annual property tax revenue by approximately $100 million to $200 million in the near term by requiring full market-value reassessments for most inherited properties. Families who planned to pass low-assessed-value properties to children as rental investments were the most affected group.

There is ongoing legislative and ballot initiative discussion about further modifying Prop 13, including proposals to split the tax roll (taxing commercial properties at market value while keeping residential Prop 13 protections). No split-roll measure has succeeded at the statewide ballot level as of 2026. The senior tax postponement program was expanded in recent years to raise the income threshold and reduce the equity requirement, making deferral available to more California seniors.

California homeowners should note that the federal SALT deduction cap of $10,000 significantly limits the federal deductibility of California property taxes for high-value properties. A homeowner paying $12,000 per year in property taxes receives no additional federal deduction benefit above $10,000 (combined with any state income taxes paid). This effectively raises the after-federal-tax cost of California property ownership.