estate planning

California Property Tax

Brief history and status of the California property tax

If you are a California homeowner, you've probably heard about Proposition 13.  In 1978, California voters overwhelmingly approved Prop 13 to limit the government's ability to increase property taxes.

Prior to 1978, California law allowed the county assessor to reassess, or appraise, the value of your home at least every five years and increase the property tax accordingly. This was a big problem as rampant inflation and supply and demand in the 1970s jacked up California home values.

Proposition 13

Prop 13 brought many changes to the California property tax system:

  • Assessed values were rolled back to 1975 values.
  • The property tax was limited to 1% of the assessed value, plus local assessments for schools, water districts, emergency services, etc. (For most counties, the property tax is roughly 1.2% - 1.3% of the assessed value.)
  • County assessors could not increase the assessed value more than 2% per year.
  • County assessors could only reassess a property if there was a change in ownership.

Under Prop 13, the county assessor could reassess if there was a change in ownership. Change in ownership included inheriting property. If you inherited your parent's home when they passed away, you also inherited a big property tax increase. 

If your parents bought their home in the 1950s for $10,000, their property tax was around $120 per year. (Fun fact: the US Census Bureau stats show the 1950 median home price in California was $9,564.) But if you inherited it in 1985 when it was worth $300,000, the property tax would increase to $3,600 per year.

Proposition 58 Parent Child Transfers

In 1986, Proposition 58 was passed to exempt transfers from parent to child from reassessment. In the example above, after Prop 58, the property tax would remain at $120 per year after the parent's died. 

All Good Things Come to an End ... Proposition 19

When it comes to California taxes, all good things must come to an end. In 2020, Proposition 19 was passed under questionable, if not fraudulent, marketing, and the parent child transfer reassessment exemption of Prop 58 was mostly eliminated. Read more about Prop 19.

There is a loophole in Prop 19. If one of the children move into the parent's home and make it his or her home, there won't be a reassessment, and the property tax will remain the same. But the home can't be used as a rental or a vacation home. It must become a child's residence within one year of the parent's death.

California Property Tax Under Current Law

Under current California law, a change in ownership will result in reassessment and a corresponding increase in the property tax. And a change in ownership includes a transfer from parent to child, unless one of the children moves in and makes the parent's home his or her home.

If there is a change in ownership, the county assessor will reassess the property as of the date of transfer, or if it is a result of death, the date of death.

The new property tax will be approximately 1.2% of the assessed value.

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