California property taxes are based on your home's assessed value, not its market price

California property taxes work differently than most states because of Proposition 13, passed in 1978. Your tax bill is not calculated from what your home is worth today. Instead, the county assessor assigns your property an assessed value based on what you paid for it (or what it sold for most recently). That assessed value can only increase by a maximum of 2 percent per year, no matter how much your home's market value climbs.

The tax rate itself is set by your county and local agencies—schools, fire districts, water agencies. The statewide base rate is 1 percent of assessed value, but most counties add voter-approved bonds and special assessments on top. Your total rate typically falls between 0.76 percent and 1.25 percent of assessed value, depending on where you live.

This means two identical homes on the same street can have very different tax bills if one owner bought decades ago and the other bought last year. The newer buyer pays tax on a higher assessed value and will pay more until both properties are reassessed—which happens only when the property sells.

Key Takeaways

  • Your property tax is calculated on the assessed value (usually your purchase price), not the current market value of your home.
  • The assessed value can increase by no more than 2 percent per year under Proposition 13, even if your home doubles in market value.
  • The tax rate varies by county and includes the 1 percent state rate plus local bonds and assessments, typically totaling 0.76 to 1.25 percent.
  • Your assessed value resets to current market value only when you sell the property or when new construction is completed on the land.
  • You can request a reassessment if you believe the county's assessed value is wrong, but the process takes several months.

How the assessed value is determined and when it changes

When you buy a home in California, the county assessor records the sale price as your initial assessed value. If you paid $500,000, that $500,000 becomes the number used to calculate your taxes. Each year after that, the assessed value can increase by up to 2 percent—but only 2 percent, regardless of how fast the real estate market is moving in your area.

The assessed value stays frozen at that level until one of three things happens: you sell the property, you add new construction (like a second story or a pool), or the county discovers a factual error in their records. When you sell, the new owner's assessed value resets to the new sale price, and their 2 percent annual increases begin from there.

This is why long-term homeowners in California often pay far less in property tax than their neighbors. Someone who bought in 1995 for $200,000 might have an assessed value around $350,000 today, while a neighbor who bought the same house last year for $1.2 million pays tax on that full amount. Over time, the older homeowner's tax bill grows only 2 percent per year, while the newer owner's bill is locked in at a much higher level.

What the tax rate includes and how it varies by location

Your property tax bill is not just one number. It is made up of several layers. The base rate is 1 percent of your assessed value, set by the state. On top of that, your county and local agencies—school districts, fire protection districts, water agencies, community college districts—add their own rates to fund their operations. These are called voter-approved bonds and special assessments.

The total rate you pay depends entirely on where your property sits. A home in one county might have a total rate of 0.85 percent, while an identical home in another county could be taxed at 1.15 percent. The difference comes from the local agencies' funding needs and the bonds voters have approved in that area.

You can find your specific tax rate by looking at your property tax bill or by contacting your county assessor's office. The bill breaks down exactly which agencies are taking a cut and how much. If you are shopping for a home, you can ask the county assessor for the tax rate in a specific neighborhood before you buy.

Reassessment when you buy, build, or sell

The moment you close on a home purchase, the assessed value resets to your purchase price. This happens automatically—you do not need to do anything. If you paid $750,000, your assessed value becomes $750,000 on the day of closing, and your first tax bill will be based on that number.

If you add new construction to your property—a garage, a deck, a second story, or a pool—the county assessor will reassess just that addition. The new construction is assessed at current market value, and that portion of your assessed value increases accordingly. The original structure keeps its old assessed value and its 2 percent annual growth rate. Only the new part is assessed fresh.

When you sell, the buyer's assessed value resets to the sale price, and the cycle begins again for them. You do not carry your low assessed value to a new property. Each property has its own assessment history.

How to challenge your assessed value if you think it is wrong

If you believe the county assessor has made an error—either in the property description, the square footage, or the initial assessed value—you can file a Proposition 8 appeal. This is the formal process for challenging your assessment in California. You do not need a lawyer, though some people hire one.

The appeal must be filed between July 2 and September 15 each year (these dates are set by state law). You file with your county assessor's office. You will need to provide evidence that the assessed value is wrong—comparable sales in your neighborhood, a professional appraisal, or documentation of a factual error in the assessor's records.

The process typically takes several months. If the assessor agrees with you, they will lower the assessed value. If you disagree with their decision, you can appeal to the county Assessment Appeals Board. The whole process from filing to final decision usually takes six months to a year. During this time, you continue paying your current tax bill; you do not get a refund until the appeal is resolved.

Special assessments and bonds that add to your bill

Beyond the base 1 percent rate, your property tax bill often includes charges for specific local projects or services. A special assessment might fund a local street repair, a new fire station, or a water system upgrade. A voter-approved bond might pay for school construction or a park renovation. These are separate line items on your tax bill.

Special assessments are usually temporary—they last only as long as the project needs funding. Bonds typically last 20 to 30 years. Once the project is paid off, that line item disappears from your bill. You cannot opt out of these charges if you own property in the district, but you can vote on future bond measures.

Some assessments explore only to properties that directly benefit from the project. For example, a street assessment might explore only to homes on that street. Others explore countywide. Check your tax bill to see which assessments explore to your address.

Homeowner exemptions and other ways to reduce your bill

California offers a homeowner exemption that reduces your assessed value by $7,000 for your primary residence. This means if your assessed value is $500,000, the exemption brings it down to $493,000 for tax purposes. You must own the home and live in it as your primary residence to may have access to.

You explore for the exemption through your county assessor's office, usually in the year you buy the home. If you do not claim it in your first year of ownership, you can still file a late claim, though some counties charge a small fee. The exemption continues automatically each year as long as you own and occupy the home.

Other exemptions exist for seniors (Proposition 60 and Proposition 90 allow some over-55 homeowners to transfer their low assessed value to a new home), disabled veterans, and properties used for agriculture. These have specific may be able to access rules and require separate applications. Contact your county assessor to learn which exemptions you might may have access to for.

Frequently Asked Questions

Why do my neighbors pay less property tax than I do for the same-sized house?

They likely bought their home earlier than you did. Under Proposition 13, assessed value is locked to the purchase price and grows only 2 percent per year. If your neighbor bought 20 years ago, their assessed value is much lower than yours, even though the homes are worth the same today. When you sell, the new owner's assessed value resets to the current sale price.

Can I lower my property taxes by appealing my assessed value?

You can file a Proposition 8 appeal if you believe the county made a factual error or if the assessed value is genuinely out of line with comparable homes. The appeal window is July 2 to September 15 each year. You will need evidence like comparable sales or an appraisal. The process takes several months, and you continue paying your current bill while it is being reviewed.

What happens to my property taxes if my home value drops?

Your assessed value does not automatically drop when the market falls. However, you can file a Proposition 8 appeal if you believe the assessed value no longer reflects the market. If your appeal is successful, the county will lower the assessed value, and your taxes will decrease going forward.

Do I have to pay property taxes on a second home or rental property?

Yes. The homeowner exemption applies only to your primary residence. Second homes, rental properties, and investment properties are assessed at full value with no exemption. They are still subject to the 2 percent annual growth cap on assessed value, but they start from a higher base.

What is the difference between a special assessment and a bond measure?

A special assessment typically funds a specific local project (like a street repair) and is temporary—it disappears once the project is paid off. A bond measure is a larger, voter-approved debt that funds major projects (like school construction) and typically lasts 20 to 30 years. Both appear as separate line items on your property tax bill.