All property owners in California should be aware of California’s constitutional amendments, Proposition 13 and Proposition 8. Proposition 13 provides three important functions in property tax assessments in California:

  1. Establishes a base year for all properties (typically the year it was purchased).
  2. Sets a restricted rate of increase on assessments of no greater than 2% each year.
  3. Places a limit on property taxes to 1% of the assessed value (plus additional voter-approved taxes).

New property base years are established when there is a change in ownership or at the completion of new construction. At that time, the property is reassessed at its current market value as of the date of transfer or in the case of new construction, when the construction is complete. If construction is just an addition, the original base year value for improvements remains and a new base year value on the new construction is added.

Proposition 8 was passed as an amendment to Proposition 13. It annually caps the assessed value of property at the lesser of its market value or its factored base year value. Proposition 8 allows a temporary reduction when the market value of property has fallen below its Proposition 13 adjusted base value. However, since property values have been increasing for the last few years, the Proposition 8 cap only applies to properties with unique circumstances.

These amendments mean that in the current market, new construction and remodels (particularly those that add square footage to a property) are most likely to trigger a reassessment and are therefore the most likely to benefit from a property tax appeal in California.

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