Frequently new homeowners will ask why they are paying twice as much (or far more) in property taxes than their neighbor. The answer is Proposition 13. Passed by the voters in June, 1978, Proposition 13 is an amendment to the California Constitution that limits the assessment and taxation of property in California. It restricts both the tax rate and the rate of increase allowed in assessing real property as follows:
- The property tax cannot exceed 1 % of a property’s taxable value, plus bonds approved by the voters, service fees, improvement bonds, and special assessments.
- A property’s original base value is its 1975-76 market value. A new base year value is established by reappraisal, whenever there is a change in ownership or new construction. Except for change in ownership or new construction, the increase in the assessed value of a property is limited to no more than 2% per year.
- Business Personal property, boats, airplanes and certain restricted properties are subject to annual reappraisal and assessment.
- In the case of real property, the adjusted (factored) base year value is the upper limit of value for property tax purposes.