Property tax is a key source of revenue for local governments in California. Understanding how it works and what impacts your bill can help homeowners budget and plan. Let's explore the property tax system in California, including how it's calculated, amounts paid, and exemptions. Discover how California property taxes compare to other states across the US as well.
How is Property Tax Calculated in California?
In California, property tax is based on the assessed value of your real estate. This assessed value is established by the county assessor when you purchase a property. The assessed value is the property’s market value on the purchase date. This value typically remains constant until the property is sold again.
When a home is sold, the assessed value resets based on the new purchase price. This process is known as Proposition 13, approved by voters in 1978. It limits property tax increases by capping increases in a property's assessed value at 2% per year as long as it is not sold.
To calculate your property tax bill, the county applies the appropriate tax rate to your assessed value. California tax rates vary across counties but the average statewide is approximately 1.1%. Tax rates include levies for things like schools, public services, and bonds.
Your property tax bill is issued annually by your county tax collector's office. Most counties allow property tax payments on a semi-annual or quarterly installment schedule.
How Much Do You Pay in Property Taxes in California?
How much you pay in California property tax depends primarily on your home's assessed value and your county's tax rate. With home prices frequently in the six figures in California, property tax bills are substantial.
The statewide average effective property tax rate is 0.72%. For a home assessed at $600,000, that equates to $4,320 annually or $360 per month. At the nationwide average home value of $374,900, the yearly tax would be approximately $2,700.
In some higher-cost parts of California like San Francisco, average tax amounts are over $6,000 annually. Lower-cost regions see averages around $2,000-3,000 per year. Keep in mind county tax rates also impact your final bill.
Property taxes in California tend to be lower than in many other states due to Proposition 13 limiting assessed value growth. However, high home values offset this advantage in many markets.
What Are the Property Taxes for a Homeowner in California?
For a typical California homeowner, property tax is often their largest recurring tax expense. Take the example of a home purchased for $300,000 in Alameda County, which has a 1.17% tax rate.
With a $300,000 assessed value, the annual property tax would be:
$300,000 x 0.0117 = $3,510
This would equal $292.50 per month paid in property tax. Over 30 years, the total property tax on this home would be $105,300 assuming the 2% limit on assessed value growth under Prop 13.
Property taxes stay with the home rather than the owner in California. So when you sell, your tax bill is transferred to the new buyer based on the updated assessed value.
How Much is Property Tax on a $300,000 House in California?
For a $300,000 home in California, the annual property tax payment would be approximately $3,000 on average statewide. This is based on the current 0.72% average effective tax rate across the state's counties.
- San Francisco: $3,840 annually ($320/month) at 1.28%
- Orange County: $3,060 annually ($255/month) at 1.02%
- Fresno County: $2,550 annually ($212.50/month) at 0.85%
Property taxes are generally higher in coastal urban counties versus inland rural ones. But even within the same county, cities can have slightly different property tax rates levied.
Always check your specific tax assessor's office to see the property tax rate applied to your home's assessed value. This gives you the most accurate estimate of your tax bill.
How Often Do You Pay Property Tax in California?
Most California counties offer homeowners the option to pay property tax in either two or four installments. The due dates vary but are typically:
- Semi-Annual Payments: December 10 and April 10
- Quarterly Payments: December 10, February 1, April 10, June 30
When you pay only once a year, the payment is due by December 10. Some counties impose a small fee for semi-annual or quarterly installments.
Paying property tax quarterly spreads out your payments into smaller chunks. This can make budgeting easier for some homeowners. Keep in mind, that partial payments do not reduce your total tax obligation.
Who Is Exempt From Paying Property Taxes in California?
California offers a few property tax exemptions provided homeowners meet specific criteria:
Homeowners' Exemption - Up to $7,000 off assessed value for owner-occupied homes. Income limits apply.
Disabled Veterans' Exemption - Up to $150,000 off assessed value for qualified veterans.
Charitable Exemptions - Full or partial tax exemption for properties owned by qualified non-profit organizations.
Religious Exemptions - Full or partial tax exemption for properties used solely for religious worship.
All other homeowners must pay property tax in California. The state does limit annual increases via Prop 13, but no one is entirely exempt besides rare cases like governments.
Is Property Tax Mandatory in California?
Payment of property tax levied by counties in California is mandatory for all homeowners. The only exceptions are certain exemptions granted to veterans, non-profits, religious groups, or disabled individuals meeting specific requirements.
Failure to pay will result in penalties and interest added to your property tax bill. If left unpaid, the county can put a tax lien on your home and ultimately foreclose. Mortgage lenders will also pay your property tax and bill you if not paid on time.
Think of property tax as a mandatory public service fee for being a homeowner in your community. Revenue funds schools, infrastructure, police and fire departments, and government services. Not paying has consequences for community funding and your property ownership.
Which State Has the Highest Property Tax?
New Jersey has the highest effective statewide property tax rate in the U.S. at 2.47% of home value. This means a home assessed at $300,000 would pay $7,410 annually in property tax.
Other high property tax states include:
- New Hampshire: 2.05% effective tax rate
- Connecticut: 1.94% effective tax rate
- Wisconsin: 1.76% effective tax rate
- Illinois: 1.67% effective tax rate
California ranks #12 nationally with an approximately 0.72% average effective tax rate. However, high home values in many areas lead to high total bills.
What State Has the Cheapest Property Tax?
Hawaii has the lowest effective statewide property tax rate at just 0.27% of home value. This equals just $810 annually paid on a $300,000 home.
Alabama, Colorado, Louisiana, and Washington also have low average property tax rates ranging from 0.43% to 0.55%.
Factors like Proposition 13 in California limiting assessed value growth contribute to lower effective property tax rates in some states. Cheaper home values in others also reduce annual bills.
What States Have the Worst Property Tax?
The states with the worst property taxes are generally those with high tax rates plus expensive home values. This leads to large tax bills for homeowners.
The top 5 worst states for property tax are:
- New Jersey - Avg. tax of $9,284 on $376k home
- Connecticut - Avg. tax of $8,818 on $455k home
- New Hampshire - Avg. tax of $6,983 on $340k home
- Illinois - Avg. tax of $6,280 on $376k home
- Vermont - Avg. tax of $6,049 on $358k home
California ranks #13 for the highest average property tax bill. Although its tax rate is moderate, very costly home prices in much of the state drive up total taxes owed.
Are Property Taxes Higher in Texas or California?
Texas property taxes are higher on average than California when comparing statewide medians. The median property tax bill in Texas is $3,327 annually. In California, it is $2,287 annually.
The higher bills in Texas mainly result from higher median home values ($211k in Texas versus $178k in California) combined with a higher effective tax rate (1.69% in Texas versus 0.72% in California).
However, in many coastal urban counties in California, property taxes exceed Texas due to million-dollar home values. Property taxes in Texas are also generally more equitable across the state versus the extremes in California.
The property tax system in California relies on assessed home values and county tax rates to determine how much tax is owed annually. Under Proposition 13, increases to assessed values are limited to 2% per year, which has contributed to lower property taxes compared to some other states. However, homeowners in California still face substantial property tax bills due to high real estate values along with taxes used to fund local communities. Checking your specific county's property tax rate and housing market can give you an estimate of how much to budget for this annual expense.
