Oregon vs. California Property Tax: A Comparison

Property tax systems in Oregon and California represent two of the most distinct approaches to real estate taxation in the United States. Homeowners and investors in these neighboring states face fundamentally different methods for how their property is valued, how much that value can increase annually, and the ultimate rate they pay. These differences create unique financial landscapes for property owners, influencing everything from long-term affordability to the predictability of annual tax bills.

Establishing the Initial Taxable Value

In California, the property tax system is based on “acquisition value,” a result of Proposition 13 passed in 1978. This dictates that a property’s initial assessed value for tax purposes is its purchase price. When a property changes ownership, the county assessor resets its value to the current market price paid by the new owner, establishing a new “base year value.” For example, a home purchased for $800,000 has its initial assessed value set at that figure, and reassessment to full market value only occurs upon another change of ownership or if significant new construction is completed. This direct link means two identical neighboring homes can have vastly different tax liabilities if one was purchased decades ago and the other recently.

Oregon’s approach fundamentally differs, creating a disconnect between a property’s purchase price and its taxable value. The state operates under a system centered on a “Maximum Assessed Value” (MAV), established by Measure 50 in 1997. This measure set the initial MAV for most properties at 90% of their 1995 Real Market Value (RMV). When a property is sold in Oregon, the new owner inherits the existing MAV; the purchase price does not reset it.

The state also tracks the property’s RMV, which is the assessor’s estimate of its current market price, and each year, the property is taxed on the lower of its MAV or its RMV. This dual-value system is why two side-by-side houses of identical quality can have profoundly different tax bills. An older home benefits from a low, inherited MAV, while a newly constructed home’s MAV is established based on its market value in its first year, leading to a much higher starting tax base.

Annual Limits on Assessed Value Growth

Once the initial taxable value is set, both states impose strict limits on how much that value can increase each year, protecting homeowners from sudden spikes. In California, the assessed value established at the time of purchase can increase annually by the rate of inflation, as measured by the California Consumer Price Index. However, this growth is capped at a maximum of 2% per year. For instance, a home with an assessed value of $800,000 could see its value for tax purposes rise to no more than $816,000 in the following year, even if the market value of the home appreciated by a much larger percentage. The next year, the 2% cap would apply to the new $816,000 value.

Oregon’s system also limits annual growth, but it does so with a fixed percentage. The Maximum Assessed Value (MAV) of a property is permitted to increase by a flat 3% each year. This annual 3% increase is automatic and occurs regardless of the actual inflation rate or the performance of the local real estate market. While the MAV grows steadily at 3%, the RMV can fluctuate up or down with market conditions. If the market is flat or declining, the RMV could potentially fall below the rising MAV, providing a buffer against paying taxes on a value that exceeds what the property is currently worth.

Constraints on Property Tax Rates

Beyond limiting the growth of assessed values, both states place constitutional caps on the tax rates that local governments can apply to those values. California’s Proposition 13 established a foundational limit, capping the general property tax levy at 1% of a property’s assessed value. The law allows for additional rates to be levied to pay for local, voter-approved general obligation bonds. These bonds are frequently used to fund projects like school construction, water infrastructure, or transportation improvements. Because these additional charges are stacked on top of the 1% general levy, the effective tax rate a homeowner actually pays is often higher, varying significantly from one community to another.

Oregon’s system imposes a more complex, dual-layered rate limit under a constitutional provision known as Measure 5. This law sets two distinct caps based on the property’s Real Market Value (RMV), not its lower Assessed Value.

• $5 per $1,000 of RMV for taxes that fund public schools.
• $10 per $1,000 of RMV for taxes that fund general government services, such as police and fire departments.

A feature of Oregon’s system is “compression.” If the combined tax rates from all local taxing districts would result in a tax bill that exceeds either limit for a property, the tax is forcibly reduced. The reduction is applied first to local option levies, which are temporary, voter-approved taxes. If reducing those to zero isn’t enough, the permanent tax rates of the districts are then proportionally lowered for that property.

Available Exemptions and Relief Programs

Both states offer programs to reduce the property tax burden for certain homeowners, though the nature and generosity of these programs differ.

California

California provides a Homeowner’s Exemption for all owner-occupied primary residences. This program reduces the property’s assessed value by $7,000, which translates to a direct tax saving of about $70 per year. The Disabled Veterans’ Property Tax Exemption offers a significant reduction in assessed value for veterans with a service-connected disability, with the exemption amount increasing based on the level of disability and income. Additionally, the state offers a property tax postponement program, which allows eligible seniors, blind, or disabled citizens with an annual household income of $51,750 or less to defer payment of their property taxes, with the deferred amount becoming a lien on the property.

Oregon

Oregon offers its own set of targeted relief programs, though it lacks a general homestead exemption comparable to California’s. One program is the Disabled Veteran and Surviving Spouse Exemption. This provides a property tax exemption on a portion of a home’s assessed value for veterans with a qualifying disability rating or for their unmarried surviving spouses. The state also provides the Senior and Disabled Citizen Deferral Program. This allows eligible homeowners who are 62 or older or who are disabled to delay paying their property taxes until they sell the property or pass away. The deferred taxes accrue interest and are recorded as a lien against the property.