Buying a home is an exciting milestone, but it also comes with new responsibilities such as property taxes. Whether you’re a first-time homebuyer or relocating within California, understanding how property taxes work can help you avoid surprises and better budget for the true cost of homeownership.
What Are Property Taxes?
Property taxes are annual taxes paid to your local government based on the assessed value of your home. These funds help support vital community services like public schools, road maintenance, police and fire departments and local infrastructure projects.
The exact amount you’ll pay depends on where you live, your home’s assessed value and whether there are additional voter-approved taxes in your area.
How California Property Taxes Are Calculated
California property taxes operate under rules set by Proposition 13, passed in 1978. This measure changed the way properties are taxed and has lasting effects for today’s homebuyers.
Here’s what Proposition 13 means for you:
-
Your home’s assessed value starts with the price you paid at the time of purchase.
-
Limits the amount of taxes that can be charged to an owner of locally assessed property to 1% of the property’s taxable value.
-
Additional taxes or fees may be added depending on your county, city or special districts (these can include things like school bonds or local infrastructure projects).
-
The assessed value can only increase by up to 2% per year, unless there’s a change in ownership or major improvements made to the home.
Why Property Taxes Matter When Buying
One key point many buyers overlook is that your future tax bill won’t necessarily match the seller’s current one. Property taxes reset when the home changes ownership. That means if the seller bought the home 15 years ago, their taxes are likely much lower than what you’ll pay after closing.
A supplemental property tax is a one-time tax that covers the difference between the previous owner’s assessed value and your new purchase price. Since property taxes are billed annually but reassessed at the time of the sale, this supplemental tax makes up for the increase in value from the date of change in ownership to the end of the fiscal year. The supplemental tax bill is in addition to the original property tax bill and does not replace it.
Before making an offer, it’s a good idea to:
-
Review the public tax records or MLS listing for the most recent property tax amount.
-
Ask your lender to help estimate your future property tax based on the offer price.
-
Include property taxes in your monthly housing cost calculations to ensure affordability.
Understanding how property taxes work, especially under California’s Prop 13, can give you more clarity and confidence during the homebuying process. They’re not just a yearly bill; they’re part of your long-term investment and monthly budget. By planning ahead, you can avoid surprises and feel more prepared as a homeowner.
