California Property Taxes
Home buyers pay California property taxes when purchasing a home and annually thereafter.
Real estate property taxes in California help to pay for local and state services.
What are the basics?
Property taxes in California are limited by Proposition 13.
This is a law that was approved by California voters in 1978. It has two important features.
It limits general property taxes to 1% of a property’s market value in California.
It also restricts increases in assessed value to 2% per year.
This means that California’s real estate property taxes are below the national USA average.
The average property tax rate in California is 0.71%. The national average is 0.99%.
How property taxes work in California
California property taxes are based on the purchase price of the property.
When you buy a home the assessed value is equal to the purchase price.
The assessed value increases annually according to the rate of inflation, which is the change in the California Consumer Price Index.
There is a 2% cap on these increases.
For homeowners in California who have been in their homes for a long time, the assessed value can be lower than the market value.
Homeowners in California can claim a $7,000 exemption on their primary residence.
This reduces the assessed value by $7,000 saving at least $70 per year.
The exemption can only be claimed once, and it is important to do so shortly after buying property in California.
California property tax rates
Property taxes in California are applied to assessed values.
Each county collects a general property tax equal to 1% of the assessed value.
Voter-approved taxes for specific purposes or projects are common, as are ‘Mello-Roos’ taxes.
Mello-Roos taxes are voted on by property owners in California and are used to support special districts through financing for services, public works and other improvements.
Homebuyers in California trying to estimate what their property taxes will be can roughly multiply their home’s value by 1.25%.
This incorporates the base rate of 1% and additional local taxes, which are usually about 0.25%.
As the assessed value is often lower than the market value, effective tax rates (taxes paid as a percentage of market value) in California are typically lower than 1%.
The median property tax in California is $2,839 per year for a home worth the median value of $384,200.
Counties in California collect an average of 0.74% of a property’s assessed fair market value as property tax per year.
Visit here to see California property taxes by county for 2023.
Who pays property taxes in California?
If you own real estate property in California, you will be required to pay property taxes.
If you own real estate as an individual or business, you will pay real estate property taxes on it.
Even if the property was gifted to you through an estate or if you own a rental property, you are still required to pay real estate taxes.
There is no minimum or maximum amount to pay on your property in California as property taxes.
Whether you have a $50,000 or $5,000,000 house, you will owe property taxes in California.
If your property in California was purchased mid-year, there is a chance your realtor will work it out so that you and the seller split the cost or any property taxes within the calendar year.
When are California property taxes due?
Property taxes in California are assessed and collected by the county your home is located in.
It is important to remember that there are two instalments due, as well as to remember the date of these instalments.
The first instalment runs from 01 July to 31 December and tax payment is slated for 01 November. It becomes delinquent on 10 December.
Failure to pay attracts a 10% penalty.
The second instalment is due by 01 February and becomes delinquent on 10 April.
Failure to pay property taxes in California when due will see penalties rising consistently.
If your California property taxes are drawn monthly from your mortgage, you should have no remaining due balance on the instalment deadlines.
How are California property taxes calculated?
Property tax in California is calculated by Ad Velorum.
This means that real estate taxes are calculated by the value of the property.
The basic principle for calculating is that you multiply the tax-assessed rate of your property by the tax rate.
Property taxes in California cannot exceed 1% of the home value.
The value cannot go up to an amount beyond the rate of inflation measured by the Consumer Price Index, limited to 2% per year.
The sales price listed on a property deed is used to determine the base year value upon the initial purchase price in California.
Assessed value may also see adjustments in the face of home improvements, or when the property is sold.
Assessors in California consider value changes in similar properties within the area, as well as prevailing market conditions.
Looking at a simple example, this could mean:
A homebuyer in California purchases a house for $500,000.
The rate of inflation is 2% and the property price increases by 3%.
What is the assessable value for property taxes?
Remember that California property taxes cannot exceed 1% of the home value ($5,000), and the value assessed cannot go above the rate of inflation, which would be restricted to 2% ($10,000).