GLOSSARY — REAL ESTATE TERMS
Prop 13
Proposition 13 is the 1978 California law that caps property tax at 1% of a property's assessed value and limits annual increases in that assessed value to 2%, with reassessment to full market value generally triggered by a change in ownership.
How the cap works
Under Prop 13, a property's assessed value is generally set at its purchase price and can increase by no more than 2% per year, regardless of how much market value actually rises -- which is why two similar homes on the same street can carry very different tax bills depending on when each was purchased.
What triggers reassessment
A change in ownership, such as a home sale, typically triggers reassessment to full current market value, resetting the 2% annual cap going forward. This is also why a closing cost credit doesn't affect a buyer's tax basis the way a lower purchase price would -- see the rebate vs. lower price comparison for the full mechanics.
WHAT TO CHECK ABOUT PROP 13 WHEN BUYING
- Ask for the seller's current assessed value versus market price for context
- Understand your new assessed value will typically reset to your purchase price
- Budget for the property tax based on your purchase price, not the prior owner's bill
- Ask whether any Prop 19 exception could apply to your specific situation
Does buying a home always trigger reassessment?
In most standard purchases, yes -- the new purchase price becomes the new assessed value basis going forward.
Are there exceptions to reassessment?
Yes -- certain transfers, including some between parents and children or for seniors relocating under Prop 19, can avoid full reassessment under specific conditions.
Why do my neighbors pay different property tax than I do?
Because assessed value is generally tied to purchase price and date, not current market value -- longer-tenured owners often have significantly lower assessed values than recent buyers.