Property Tax

California imposes a tax on the ownership of real property. This tax (known as a levy) consists of as many as three separate levies: a “general tax levy”, a voter approved bond repayment levy, and special assessments imposed by the local district. When discussing property taxes, and the increase in them which can occur when real property is transferred, most people are referring only to the general levy. In 1978, Proposition 13 capped the general levy at 1.0% of the fair market value of the property transferred, and tied the annual increases in this levy to inflation, with a cap of no more than 2.0% per year.

The rules regarding property tax and reassessments are found not only in the California Revenue and Tax Code, but also in the Property Tax Rules, and in rulings by the Board of Equalization. Explanations for these rules also appear in the County Assessor’s Handbook.

Property taxes are reassessed when property is transferred, whether the transfer is by sale, gift, or bequest, unless an exception applies to prevent the reassessment. This is where the assistance of an attorney, experienced in real property transactions, can be very helpful.