Does Prop 13 Still Apply Today?
May 28, 2009 Real Estate Properties
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Current California Property Tax Law does apply today to all property owners in California. Prop 13 was enacted in 1978 to control the amount of property taxes paid by homeowners. Prior to Prop 13 there was no limit on property taxes. The assessed value was based on the changing market value every year and because the market values increased significantly over time in California, the amount of property taxes increased significantly. As the values of the homes increased over time, older folks were being driven out of their homes unable to pay the property tax increases.
Prop 13 was passed to assist seniors on fixed incomes who could not adjust to increasing property taxes. This amendment was initiated by Howard Jarvis was a result of a ballot initiative passed by voters in June of 1978, called People’s Initiative to Limit Property Taxation. Current California Property Tax Law is an amendment to the California State Law and is still a hot topic today because of its limiting nature and the imbalance it has created in terms of how much each taxpayer pays. Taxpayers who bought thirty years ago dont pay nearly as much in property taxes as those who have acquired homes recently and as a result of this many taxpayers feel Prop 13 is unfair and should be repealed.
Current California Property Tax Law applies to all who own property in California even those who have purchased recently. What Prop 13 does today is establish a cap on the amount of property taxes the government can charge you. The initial purchase price of your property, as long it was a market transaction, becomes your base value.
A market transaction means that as long as your purchase price was market value it will be accepted as your taxable base value. If you paid well below market value for your home the Assessor will assess you at market value because that is what California Property Tax Law states. Your assessment is based on market value as of the re-assessable event and if your purchase price was market value the Assessor will accept it as market value. If not, the Assessor will determine a value for you.
Usually, most California Homeowners pay close to 1.25% of their assessed value in property taxes per year. For example if your assessed value is $100,000 you would pay about $1,250 per year in property taxes. The difference between your base value and your assessed value is very simple. Your base value is the value established as of the date of a re-assessable event usually when your purchase your home. The assessed value is the amount you pay taxes on for a designated year since all base values in California have a 0-2% increase per year based on Prop 13 and the Consumer Price Index rates for inflation in a given year.
The base value is the value property taxes are based on and then it increases slightly every year. Generally, most Californians pay about 1.25% of their assessed value in actual property taxes per year. So as your base value increases every year raising your property tax value year to year, accordingly what you pay in property taxes increases. Remember the amount you pay is limited based on State Law. So even if the market sky rockets and your property value increases substantially, your property tax base wont increase along with the market it is limited to the 2% trend based on State Law.
About the author: Valerie Faltas has specialized in Property Taxes for the past 5 years and has produced a free report that exposes the truth about Prop 13 and Prop 8. Check out our FREE California ebook which explains Prop 13 in more depth with examples! Feel free to contact me with any questions you may have! Get your free report on Prop 8 and Prop 13 now. You have full permission to reprint this article provided this box is kept unchanged.
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