California Property Taxes 101

All property owners in California should be aware of California’s constitutional amendments, Proposition 13 and Proposition 8. Proposition 13 provides three important functions in property tax assessments in California:

1. Establishes a base year for all properties (typically the year it was purchased).
2. Sets a restricted rate of increase on assessments of no greater than 2% each year.
3. Places a limit on property taxes to 1% of the assessed value (plus additional voter-approved taxes).

New property base years are established when there is a change in ownership or at the completion of new construction. At that time, the property is reassessed at its current market value as of the date of transfer or in the case of new construction, when the construction is complete. If construction is just an addition, the original base year value for improvements remains and a new base year value on the new construction is added.

Proposition 8 was passed as an amendment to Proposition 13. It annually caps the assessed value of property at the lesser of its market value or its factored base year value. Proposition 8 allows a temporary reduction when the market value of property has fallen below its Proposition 13 adjusted base value. However, since property values have been increasing for the last few years, the Proposition 8 cap only applies to properties with unique circumstances.

These amendments mean that in the current market, new construction and remodels (particularly those that add square footage to a property) are most likely to trigger a reassessment and are therefore the most likely to benefit from a property tax appeal in California.

California property assessments are based on the purchase price of the property; the assessed value is equal to the purchase price in the first year. Every year thereafter, the assessed value increases according to the rate of inflation, capped at an annual increase of 2%. For property owners who have owned their properties for a long time, the assessed value is likely to be significantly lower than market value, particularly those in the hottest housing markets in California.

This tax assessed value, minus any exemptions, is multiplied by the property tax rate to get the property taxes due.

Assessed value is often lower than market value, so effective tax rates (taxes paid as a percentage of market value) in California are typically lower than 1%.

The best way to reduce your tax liability is to file for every exemption you qualify for. There are several exemptions available, some of which are listed below.

• Homeowner’s Exemption - If you own a home and it is your principal place of residence on January 1, you may apply for an exemption of $7,000 from your assessed value each year. This equates to at least ~$70 off your property tax bill annually. Note that you only need to claim this exemption once, and it’s important to submit this claim soon after you buy.
• Disabled Veterans Exemption - If you are a disabled veteran who is blind in both eyes, has lost the use of two or more limbs, or is totally disabled as a result of injury or disease incurred in military service, you may be eligible for an exemption of the assessed value of your home. The Veterans Administration must certify the veteran’s disability. Unmarried surviving spouses of certain deceased veterans may also qualify.
• Institutional Exemption - Property used exclusively by a church, nonprofit college, cemetery, museum, school, or library may qualify for an exemption. Property owned and used exclusively by a nonprofit, religious, charitable, scientific, or hospital corporation may also be eligible. To receive the full exemption, an applicant must file completed claim forms by February 15.
• Disaster Relief - You may be eligible for tax relief if your property is damaged or destroyed by a calamity, such as fire or flooding. To qualify, you must file an Application for Reassessment: Property Damaged or Destroyed by Misfortune or Calamity with the Assessor’s Office within 12 months from the date the property was damaged or destroyed. The loss must exceed $10,000 of current market value.
• Builders/Developers - New construction built specifically for sale may be excluded from supplemental assessment.

Beyond taking every exemption you qualify for, you can also appeal your property’s assessed value with the county if you believe your property has been inaccurately assessed.

If you believe that your property has been inaccurately assessed, you can file an appeal. The appeal window for all regular appeals in all counties opens July 2nd for commercial and residential properties and the filing deadline varies by county. Most counties are either September 15 or November 30, and you can check with your local county tax assessor’s website or see your valuation notice for more information.

In the case of a Supplemental assessments, the deadline to appeal is within 60 days of mailing date or postmark date on the notice, whichever is later.

Note that there is a filing fee for some counties in California, including Contra Costa and Los Angeles county.

There are two types of appeals. The first type of appeal is called "Decline In Value". Proposition 8 allows all property owners to request a property valuation review from their county assessor. This process involves filing the appropriate forms and compelling evidence with the county assessor’s to reduce a property’s assessed value. The local assessor will review and respond to these requests on a rolling basis, typically prior to any formal appeal process.

The second type of appeal is called a "Base Value Appeal". You can only appeal your property’s base value within 3 years of when it is set either by a purchase or new construction. When appealing the base value of your property, you are arguing the value that sets the basis from which your property tax assessment will grow for years to come. Base value appeals can be quite valuable when contemplating the multiple years of tax savings.

Every county in California has a process by which you may contest or appeal your property’s assessed value. The formal process of appealing your property valuation often takes many months.

It can be time-consuming and confusing to appeal property taxes in California. Ownwell can handle the entire appeal process on your behalf. Our team of local experts will put their intimate knowledge of your county's appraisal districts policies to work in order to build an appeal that can maximize your chances at getting a property tax reduction.

Accurate as of July 22, 2022

Sources:
Deadlines: https://www.boe.ca.gov/proptaxes/pdf/filingperiods.pdf
Alameda: https://www.acgov.org/auditor/tax/
San Francisco: https://sftreasurer.org/property/secured-property-taxes#:~:text=The%20secured%20property%20tax%20rate,or%20pay%20in%20two%20installments.
Santa Clara: https://controller.sccgov.org/property-tax-rate-book
San Mateo: https://www.smcgov.org/controller/property-tax-rate-book