Do Property Taxes Go Up in California?

Property taxes in California represent a significant component of homeownership costs and are subject to various adjustments. While generally stable, these taxes can increase due to several factors. Understanding how property taxes are determined and adjusted is important for homeowners and prospective buyers. This article explains how property taxes can rise in California.

The Base Property Tax and Annual Increases

California’s property tax system operates under Proposition 13, enacted in 1978, which established a base year value for all real property. This base year value is typically the property’s market value at the time of purchase or new construction completion. The property tax rate generally applies at 1% of this assessed value, plus any voter-approved local bonded indebtedness. This foundational value serves as the starting point for property tax calculations.

Once established, the assessed value of a property can only increase by a maximum of 2% per year or the rate of inflation, whichever is lower. This annual adjustment, often referred to as the “CPI adjustment,” helps keep property tax increases predictable and modest for long-term homeowners. For instance, if inflation is 1.5% in a given year, the assessed value would increase by 1.5%, not the full 2%.

Events That Trigger Reassessment

While annual increases are capped, certain events can trigger a complete reassessment of a property’s value, potentially leading to a substantial increase in property taxes. A “change in ownership” is a primary trigger for reassessment, meaning that when a property is sold or transferred, it is reassessed to its current market value. This new market value then becomes the property’s new base year value for future tax calculations, overriding the previous capped value. This can result in a significant jump in property taxes for the new owner, especially in appreciating markets.

Another event that prompts reassessment is “new construction.” When significant additions or major renovations are completed on a property, the value added by this new construction is assessed at its current market value. This newly added value is then incorporated into the property’s overall assessed value, creating a new base year value for the constructed portion. California law provides some exclusions from reassessment for certain transfers, such as those between parents and children or between grandparents and grandchildren under Proposition 19, provided specific conditions are met.

Understanding Additional Property Tax Levies

Beyond the ad valorem property tax based on assessed value, a property’s total tax bill can increase due to additional levies and fees. These charges are separate from the base property tax and are often imposed for specific local services or improvements. Common examples include special assessments, which are charges levied against properties that directly benefit from specific public improvements, such as new sidewalks, streetlights, or drainage systems. These assessments are typically approved by local governing bodies and are tied to the direct benefit received by the property.

Direct levies are another form of additional charge, often appearing on property tax bills to fund specific services like schools, libraries, or police and fire protection. These levies are frequently approved by local voters and contribute to the overall funding of public services within a community. Additionally, Mello-Roos Community Facilities District (CFD) taxes are common in newer developments, funding infrastructure and services like roads, parks, and schools that are necessary for the development. These additional levies are itemized on the property tax bill and contribute to the overall amount owed, independent of the property’s assessed value.