Prop 13 Limits Property Taxes: How It Works

California’s Proposition 13, passed in 1978, caps how much your property taxes can increase each year and sets a maximum tax rate of 1% of the assessed value. This guide explains how the limits work, what you need to know as a homeowner, and how to calculate your property tax under Prop 13.

What You’ll Need

• Your property’s most recent assessed value (from your property tax bill or county assessor’s office)
• The current year’s tax rate (usually 1% plus any local voter-approved debt)
• Knowledge of your property’s purchase date and purchase price (for new assessments)

Step-by-Step

1. Understand the 1% base rate. Prop 13 limits the general property tax rate to 1% of the assessed value. This is the base rate, and it applies to all real property unless voters approve additional taxes for specific bonds.
2. Determine your property’s assessed value. When you buy a property, its assessed value is set at the purchase price. This is called the “base year value.� If you’ve owned the property since before 1975, the base year is 1975-76.
3. Apply the annual inflation cap. Each year, the assessed value can increase by no more than 2% per year, regardless of how much the market value rises. This is the key limit—your assessed value cannot jump with the real estate market.
4. Calculate your annual property tax. Multiply the current assessed value by the 1% base rate. For example, if your assessed value is $500,000, your base tax is $5,000 (0.01 × $500,000).
5. Add any voter-approved debt. Some areas have additional taxes for bonds (e.g., school bonds, infrastructure). These are added on top of the 1% base. Check your tax bill for these extra amounts.
6. Check for special assessments. Prop 13 does not limit charges for local services like sewer, water, or trash, which appear separately on your bill. These are not property taxes under Prop 13.
7. Account for reassessment events. If you buy a new home, complete new construction, or change ownership, the property is reassessed at market value. This resets the base year value to the new purchase price, and the 2% cap starts from there.
8. Use the calculator below to estimate your tax. Enter your assessed value and tax rate to see your annual property tax.

Formula

The formula for property tax under Prop 13 is:

Annual Tax = Assessed Value × (Tax Rate / 100)

Where:

• Assessed Value = the property’s base year value, increased by up to 2% per year (in dollars)
• Tax Rate = the general levy rate, typically 1% (but may include additional voter-approved debt)

The result is your annual property tax in dollars.

Worked Example

Using the default values from the calculator: Assessed Value = $500,000, Tax Rate = 1.0%.

Step 1: Convert the rate to a decimal: 1.0% = 0.01

Step 2: Multiply: $500,000 × 0.01 = $5,000

So the annual property tax is $5,000.

When to Use This

Use this calculation when you want to estimate your property tax bill, compare the impact of a new purchase, or understand how Prop 13 affects your long-term costs. It’s also useful when planning a budget for a new home.

How to Read the Result

The result is your annual property tax before any exemptions (like the homeowner’s exemption) and before any special assessments. Your actual bill may be slightly lower if you claim exemptions, or higher if your area has additional bond measures.

Common Mistakes

• Using market value instead of assessed value. Prop 13 keeps assessed value much lower than market value for long-term owners. Always use the assessed value from your tax bill.
• Forgetting the 2% cap. The assessed value can only increase by 2% per year, not the actual inflation rate or market appreciation.
• Ignoring additional taxes. Many areas have extra taxes for bonds, which are not part of the 1% base. Check your bill.
• Not accounting for reassessment. If you buy a new home, the assessed value resets to the purchase price, which could be much higher than your previous property’s assessed value.

Tips

• Keep your property tax bill from the county assessor; it shows your current assessed value and any exemptions.
• If you are over 65, disabled, or a veteran, you may qualify for additional property tax relief programs.
• Consider whether you might transfer your Prop 13 base value to a new home (Proposition 60/90 for seniors, or Proposition 19 for other cases).
• Remember that the 2% cap applies to the assessed value, not the tax amount. The tax amount increases proportionally.

Troubleshooting

My tax bill is higher than the calculation. Check for voter-approved debt, special assessments, or a recent reassessment. Also, ensure you’re using the correct assessed value, not the market value.

I just bought a home and my taxes are much higher than expected. That’s because the assessed value was reset to the purchase price. The 2% cap will apply from that new base year.

I think my assessed value is wrong. You can appeal to the county assessment appeals board. You typically have a limited window after receiving your assessment notice.

My property tax didn’t increase by 2% this year. That’s normal—the cap is a maximum, not a guarantee. The county may not increase it if inflation is lower.

Frequently Asked Questions

Does Prop 13 apply to commercial property?

Yes, Prop 13 applies to all real property, including commercial and rental properties. The same 1% rate and 2% annual cap apply.

Can I transfer my Prop 13 assessed value to a new home?

Yes, under certain conditions. Proposition 19 allows homeowners over 55, severely disabled individuals, and wildfire victims to transfer their base value to a new home, with some restrictions.

What happens if I add a room to my house?

New construction is reassessed at market value, but only the new portion is added to your existing assessed value. The original portion remains under Prop 13.

Does Prop 13 limit all property taxes?

No, it limits the general tax rate to 1%, but voter-approved bond taxes and special assessments (like for sewers or lighting) are not capped.

How do I find my assessed value?

Look at your annual property tax bill or contact your county assessor’s office. Many counties have online portals.

Can Prop 13 be repealed?

Repealing Prop 13 would require a two-thirds vote in the legislature or a voter initiative. There have been attempts, but none have succeeded.

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in assessed | Assessed Value | $ | 500000 | 1000 | 10000000
in rate | Tax Rate | % | 1.0 | 0.1 | 5.0
out tax | Annual Property Tax | $ | assessed * rate / 100 | 2