How Prop 13 Works: California Property Tax Limits
Since 1978, Prop 13 has tied California property tax to what you paid, not what your home is worth today. That one rule explains why neighbors in identical houses can pay very different bills.
Prop 13 does two things. It limits the general property tax to 1% of assessed value, and it sets assessed value at what you paid, then lets it rise by no more than 2% a year (less if California inflation is lower) until the property sells or you build something new. Voter-approved bonds and special assessments are added on top, so most bills come to roughly 1.1% to 1.25% of assessed value.
The 1% rate limit
Article XIII A of the California Constitution, added by Prop 13 in 1978, caps the general property tax at 1% of a property's assessed value. Before Prop 13, rates were set locally and averaged well over 2%. Anything above 1% on your bill today falls into one of two groups:
- Voter-approved debt for school bonds and other bonds, which varies by tax rate area.
- Special taxes and assessments, such as Mello-Roos, parcel taxes and lighting or landscape districts. Many are flat charges, not percentages.
Prop 13 also requires a two-thirds vote of local voters for new special taxes, which is why local parcel taxes need a supermajority.
The assessed value and the 2% cap
Your assessed value starts at your base year value: the purchase price (or the 1975-76 value for property owned since then), plus the value of any new construction. Each year, the assessor may raise it by the change in the California Consumer Price Index, up to 2%.
For the 2026-27 roll, the Board of Equalization set the factor at the full 2%. There was a wrinkle: the October 2025 price index was never published during the federal shutdown, so the board used the August 2024 to August 2025 change instead. In most years inflation is above 2% and owners get the full 2%. In a handful of years since 2010 it has been lower, and assessed values rose less.
A worked example
Someone bought a house in 2012 for $450,000 and lives in it. After 14 years of the maximum 2% increase, the assessed value for 2026-27 is at most $593,765. With the $7,000 homeowners' exemption, the 1% general levy is about $5,868 a year.
If the house is now worth $1,100,000 and sells, the buyer's assessed value resets to the $1,100,000 price and the same levy becomes about $10,930, before bonds and special assessments. That gap between long-time owners and new buyers is Prop 13's best-known effect.
What triggers a reassessment
- A change in ownership: a sale, most transfers by gift or inheritance, or a transfer of more than 50% of a company that owns the property.
- New construction: an addition, a new ADU or a major renovation. Only the new part is added at market value; the rest keeps its Prop 13 value.
After a purchase, the county also sends a supplemental tax bill for the difference between the old and new assessed value for the rest of the fiscal year. New owners often don't expect it.
Transfers that don't count
- Transfers between spouses or registered domestic partners, including at death or divorce.
- Adding or removing a co-owner in some cases, such as putting a home in your own revocable trust.
- Parents to children, but only within Prop 19's limits since February 16, 2021: the child must make it their primary residence within a year, and only up to $1,044,586 of the difference between market value and assessed value is excluded.
- Base-year transfers: owners 55 or older, severely disabled owners and disaster victims can move their assessed value to a replacement home anywhere in California under Prop 19.
When values fall
Prop 13 sets a ceiling, not a floor. If your home's market value on January 1 drops below its Prop 13 value, the assessor must assess it at the lower market value (known as a Prop 8 decline-in-value). When the market recovers, the value can rise faster than 2% a year, but never above the Prop 13 value it would have had anyway. If you think your home is over-assessed, you can ask the assessor for a review or file an appeal.
Run your numbers
Our Prop 13 Assessment Growth Simulator projects your assessed value and tax year by year. The property tax calculator adds your county's average rate, and our guide to how property tax is calculated in California walks through a full bill.
Frequently Asked Questions
What does Prop 13 do?
It limits the basic property tax rate to 1% of assessed value and sets your assessed value at the purchase price, then lets it rise by no more than 2% a year until the property is sold or newly built on. Voter-approved bonds and special assessments are added on top of the 1%.
Can my assessed value go up more than 2% in a year?
Only if there's a change in ownership, new construction, or if the assessor had temporarily lowered your value after a market decline and is restoring it. In those cases the value can rise to market value or back toward your Prop 13 base.
Does Prop 13 apply to commercial property?
Yes. Prop 13 covers homes, rental property and commercial property alike. A 2020 measure (Prop 15) that would have reassessed large commercial properties at market value failed.
Do my children keep my Prop 13 value if they inherit my house?
Only in limited cases since Prop 19 took effect in 2021. The child must move in as their primary residence within one year, and only the first $1,044,586 of the difference between market value and your assessed value can be excluded. Rental and vacation homes are reassessed.
What is the Prop 13 inflation factor for this year?
2% for the 2026-27 roll, the full limit. The Board of Equalization announces it each winter from the change in the California Consumer Price Index.
This article is for general information only and is not tax or legal advice. Your county assessor sets your assessed value; check your tax bill for the exact rate.