California’s Proposition 13 is a 1978 constitutional amendment that caps property taxes at 1% of a home’s purchase price and limits annual increases in assessed value to 2%, no matter how fast the market moves. The practical result is that your property tax bill tracks when you bought the home, not what it is worth today. Long-held homes pay far less than recently purchased ones on the same block, and that gap is the single most important thing to understand about how property is taxed in California.
The Three Rules That Define Proposition 13
Proposition 13 is codified as Article XIII A of the California Constitution and does three things.1Justia Law. California Constitution Article XIII A 1 – Tax Limitation
First, it caps the property tax rate at 1% of a property’s full cash value. That value is set at the time of purchase or new construction. It does not float with the market.
Second, the assessed value can rise by no more than 2% per year. If your neighborhood doubles in value over a decade, your assessment still crawls up at 2% annually.
Third, it imposes supermajority vote requirements on new taxes. New state taxes need two-thirds approval in the legislature. Local special taxes need two-thirds approval from voters.
What This Means for Your Tax Bill
The acquisition-value system produces dramatic differences between households. A homeowner who bought in 1990 for $200,000 might pay taxes on an assessed value around $400,000 today, even if the home is now worth $1.5 million. A next-door neighbor who bought an identical house last year pays taxes on the full $1.5 million purchase price.
Both pay the same 1% rate. One pays four times as much.
Your assessed value resets to market value only when the property changes hands or undergoes new construction. In between, the 2% annual cap controls. This is why the timing of a purchase matters so much in California, and why selling and buying again, even within the same neighborhood, has traditionally been expensive from a tax standpoint.
How Proposition 19 Changed Inheritance and Senior Moves
Proposition 19 passed in November 2020 and modified Proposition 13 in two areas that affect ordinary homeowners directly: inherited property and tax-base transfers for older owners.
Inherited Homes
Before Proposition 19, parents could pass a primary residence to their children with no reassessment and no conditions. They could also pass up to $1 million in assessed value of other real estate, including rentals and commercial property, without triggering reassessment. Children often kept the low tax basis and rented the properties out at market rates.
That changed. The child must now actually live in the inherited home as a primary residence and file for the homeowners’ or disabled veterans’ exemption within one year of the transfer.2Board of Equalization – BOE.ca.gov. Proposition 19 If the child moves out, the property gets reassessed on the next lien date. The old exclusion for non-primary-residence properties is gone entirely.
There is also a value cap. For transfers occurring between February 16, 2025, and February 15, 2027, the protected amount is the property’s existing assessed value plus $1,044,586.2Board of Equalization – BOE.ca.gov. Proposition 19 If the home’s market value exceeds that threshold, the difference is added to the assessed value. Family farms follow similar rules but do not require the heir to live on the property.
Moves for Owners 55 and Older
Proposition 19 also expanded the ability of homeowners age 55 or older, severely disabled homeowners, and wildfire victims to carry their existing tax basis to a replacement home anywhere in California.3California Legislative Information. California Constitution Article XIII A – Section 2.1 Before, transfers were limited to the same county or to counties that chose to participate, and many did not. Now the transfer works statewide, and qualifying homeowners can use it up to three times.2Board of Equalization – BOE.ca.gov. Proposition 19
If the replacement home costs the same or less than the original, your old tax basis carries over intact. If it costs more, the difference between the two sale prices gets added to the transferred basis. You must buy the replacement within two years of selling the original.
Commercial Property and the Entity Transfer Loophole
Commercial and industrial properties get the same Proposition 13 protections as homes. Where they differ is in how ownership can change without triggering reassessment.
Residential property gets reassessed when it is sold or passed to heirs. Commercial property is often held by a legal entity, and transfers of ownership interests in that entity do not necessarily count as a change of ownership for property tax purposes. Under California’s Revenue and Taxation Code, reassessment is triggered only when someone obtains control of more than 50% of the ownership interests in the entity.4California Legislative Information. California Revenue and Taxation Code 64 Transfers at or below that threshold, even stacked over time, do not trigger reassessment as long as no single acquirer crosses the majority line.
A separate rule tracks “original co-owners” when property is first transferred into an entity, and reassessment is triggered if cumulatively more than 50% of those original interests change hands. Sophisticated buyers can still structure deals to acquire effective economic control while staying under the threshold.
This is why reform efforts focus on commercial property. A corner store that sells outright is reassessed; an office tower quietly traded through entity transfers may not be.
Mello-Roos and Other Charges You May See on Your Bill
Because the 1% cap and the two-thirds vote requirement constrain how local governments raise money, California developed alternative financing tools that show up on property tax bills as separate charges.
The most common is the Mello-Roos Community Facilities District, created by the Legislature in 1982 in direct response to Proposition 13. Mello-Roos districts levy special taxes on properties within a defined area to pay for infrastructure, schools, and other facilities.5OC Treasurer-Tax Collector. Mello Roos Information Bond issuances within these districts require property-owner approval rather than a general vote.
Some homeowners in newer developments pay more in Mello-Roos assessments than they do in base property taxes to their city, school district, and county combined. If you are buying in a newer subdivision, the Mello-Roos line on the tax bill deserves close attention before you close.
Recent and Upcoming Reform Attempts
The core of Proposition 13 has survived every major challenge, but reform pressure is constant.
In 2020, Proposition 15, known as the “split roll” initiative, would have required commercial and industrial properties to be reassessed at current market value while leaving homes alone. The Legislative Analyst’s Office estimated it would have generated $8 billion to $12.5 billion in additional annual property tax revenue by 2025.6Legislative Analyst’s Office. Proposition 15 Voters rejected it roughly 52% to 48%.
In 2024, Proposition 5 would have lowered the local bond approval threshold from two-thirds to 55% for affordable housing and public infrastructure. Voters rejected it by about 55% to 45%.
Business-aligned groups behind a counter-measure called the Taxpayer Protection and Government Accountability Act were blocked by the California Supreme Court from the November 2024 ballot and have signaled a narrower version for 2026. Split-roll supporters have not given up either. Expect more narrowly drawn ballot measures rather than any single sweeping change, with commercial reassessment the most likely target because it leaves residential rules untouched.