Q: What is Proposition 13 (Prop. 13)?
A: Proposition 13 is a property tax-limitation initiative passed by California voters in 1978. Every homeowner in California, whether they purchased their home yesterday or in 1978, is protected under Prop. 13. The assessed value of the home is set at the time of purchase. Prior to Prop. 13, home values could fluctuate depending on real-estate market values at the time. A County Assessor would base property tax rates on those fluctuations and they could change annually. Now, every homeowner has their property tax rate set at 1% of the initial market value or home price, and any annual increase will be capped at 2%. It will stay that way until the home is sold or some other change in ownership occurs such as a death.
Q: Why am I paying more than my neighbor?
A: The assessed value could be different because of when the homes were bought. If a home was bought in 1999, as an example, it will be assessed at a different value than a home bought say in 2004. The home in 1999 probably will have a lower assessed value than the one purchased in 2004 because of inflation. It’s based on when the home was purchased and the market value at that time.
Q: What is the difference between market and assessed values?
A: When a home is purchased, the assessed value is usually equal to* the purchase price. Each year after that, the assessed value may increase by a 2% maximum or the rate of inflation, whichever is lower. This continues until the home is sold and then it’s reassessed to the market value - sales price - at that time.
* The Assessor enrolls "market value," which is typically the sales price, but not in all cases. Read more about it here.
More questions about Prop. 13? Go to www.assessor.lacounty.gov.