When you buy a home in California, the county generally resets its assessed value to your purchase price. Under Proposition 13 the base property tax rate is generally limited to 1% of assessed value. Voter-approved bonds, direct assessments and any Mello-Roos taxes are added on top and vary by property.
How does Proposition 13 set my property tax?
Proposition 13 generally limits the base property tax rate to 1% of a property’s assessed value and limits how fast that assessed value can rise. Three rules do most of the work:
- Reset at purchase: assessed value is generally reset to the purchase price when ownership changes.
- Base rate: the general tax rate is generally limited to 1% of assessed value.
- Annual cap: increases in assessed value are capped at 2% per year until the next change of ownership.
This is why two similar homes on the same street can have very different tax bills. The amounts depend largely on when each home last sold and for how much.
Why will my tax bill be different from the seller’s?
Your bill will usually differ from the seller’s because the seller’s taxes are based on the seller’s assessed value, and yours will be based on your purchase price. If the seller has owned the home for many years, the difference can be large.
The practical takeaway is simple: do not budget from the seller’s current tax bill. Estimate your taxes from your own purchase price, then add the extra charges that apply to that specific property.
What gets added on top of the 1% base rate?
Voter-approved bonds, direct assessments and Mello-Roos taxes are added on top of the base rate, and they vary from one property to the next. They typically fall into three groups:
- Voter-approved bonds: debt approved by local voters, often for schools or other public facilities, charged as a small additional rate.
- Direct assessments: fixed charges for local services or districts, such as lighting, landscaping or flood control.
- Mello-Roos: a special tax in a Community Facilities District that pays for infrastructure and services. It is common in newer communities and is not based on the 1% rate.
Two homes at the same price in Temecula, Murrieta or Menifee can have noticeably different total tax bills because of these charges. The property’s current tax bill lists each one by line, and the seller’s disclosures should identify any Mello-Roos or special assessment district.
What is a supplemental tax bill?
A supplemental tax bill is a separate, one-time bill that covers the difference between the old assessed value and your new one for the rest of the tax year. It usually follows a purchase, because the regular bill was calculated before you bought.
Two points catch new owners off guard:
- It arrives after closing, sometimes months later, and is mailed to you directly.
- It is often not paid from a mortgage impound account, so you may need to pay it yourself. Ask your lender how it will be handled.
How can I estimate property taxes before I make an offer?
You can build a reasonable estimate by starting with the base rate on your expected purchase price and then adding the charges specific to that property. A simple approach:
- Start with 1% of the price you expect to pay.
- Look at the property’s current tax bill to find the bond rates, direct assessments and any Mello-Roos tax.
- Add those charges to your base figure.
- Ask your lender or escrow officer to confirm the estimate they are using for your loan and closing figures.
For questions about how a specific property is or will be assessed, the county assessor’s office is the authority. In southwest Riverside County that is the Riverside County Assessor. A CPA can advise you on how property taxes affect your own tax situation.
Frequently Asked Questions
Are property taxes included in my mortgage payment?
They can be. If your loan has an impound, or escrow, account, the lender collects a portion of the taxes with each monthly payment and pays the regular tax bills for you. Without one, you pay the county directly.
Will my property taxes go up every year?
Under Proposition 13, assessed value can rise by no more than 2% per year until the next change of ownership. Bond rates and direct assessments can change separately, so the total bill can move by a different amount from year to year.
Do home improvements raise my assessed value?
New construction, such as an addition, is generally assessed and added to your existing assessed value. Normal maintenance and repairs generally are not. Check with the county assessor before starting a major project.
Is there a property tax exemption for homeowners?
California offers a homeowners’ exemption that slightly reduces the assessed value of a home you own and live in as your primary residence. You apply through the county assessor. Other exemptions exist for specific situations, and the assessor can tell you whether you qualify.
Want Help Estimating the Taxes on a Home?
Aimee Ghafouri is a real estate agent based in Temecula who grew up in Murrieta and works with buyers, sellers and investors across the Temecula Valley and southwest Riverside County.
Aimee Ghafouri, 951 Properties, CAL DRE #02193341. This page is general information, not legal, tax or financial advice. Equal Housing Opportunity.
