Do you own or are you planning to own real estate in California? Then be prepared to pay property taxes.
San Diego has one of the most affordable property tax and sales tax rates in California—0.73%. This is actually lower than the national average of 1.19%.
But there’s more to property taxes than just the county’s rate. In this guide, we’ll cover the basics of how property taxes work in California and provide a full breakdown of everything you need to know. We’ll look at what types of properties are taxed, which counties have the highest rates, how much homeowners pay each year, and more. By understanding these details, you can make sure that you’re getting the best deal when it comes to paying your California property taxes.
Overview of Property Tax in California
Depending on which county in California you live in, you’ll pay a different rate. Here’s the current breakdown of Southland counties’ property tax rates:
Los Angeles 0.75%
San Bernardino 0.83%
San Luis Obispo 0.73%
Santa Barbara 0.68%
The average Californian pays a property tax of 0.74% per year on the median assessed home value of $384,200.00, which amounts to an annual sum of $2,839.00.
Knowing the rate of property tax where you live can help you plan your budget accordingly and make an informed decision when buying a new home. It can also alert potential buyers to any special assessments that may be levied on their property in the future.
How does the county use your property taxes?
Property taxes help fund local services such as schools, parks, libraries, fire protection, police protection, and other public necessities. They also help to pay for infrastructure improvements and bond measures related to local government initiatives such as school construction or improvements to public facilities. Do you like well-maintained roads and the presence of first responders in emergency situations? Then thank property taxes!
How Are Property Taxes Calculated In California?
In California, the amount of taxes owed on a property is based on the home’s assessed value which is based on the original purchase price and then increased every year by either our state’s Consumer Price Index (CPI) or 2% (whichever is lower). For example, if you bought a home in 1980 for $100,000, and the CPI has been 2% or higher for the next 43 years, then the most your home can be assessed for when calculating property taxes in 2023 is $234,318.94, even if your house might be appraised at over $800,000 based on the current market conditions. When it comes to California property taxes, you can save money by staying in a home for a long period of time.
If you believe your home has been inaccurately assessed, you may be able to lower your California property taxes by filing an appeal. Before taking this step, though, you should contact your county assessor's office and discuss the assessment with them. They can explain how they arrived at the valuation and look over any evidence you can provide to show why it is incorrect. If no agreement is reached, then you can file an Assessment Appeal Application. This process takes time but can save money in the long run; for example, if $50,000 was taken off of a home's taxable value due to a 1% tax rate that could mean up to $500 per year in savings.
Exemptions That Can Reduce Your Property Tax Bill
Wanting to save money? There are several exemptions available to reduce your California property tax burden:
California homeowners who own their primary residence can take advantage of a $7,000 exemption. This lowers the assessed value by the same amount and allows you to save up to $70 each year in taxes. Make sure to apply for the exemption when purchasing a real estate property as it does not need to be renewed annually.
If you are a veteran who has served in one of the specified wars or campaigns, you may be eligible for an exemption of up to $4,000. This applies to both those still serving in the military and those honorably discharged. Here are the specifics of who qualifies for a veterans’ exemption:
- A person serving or has served in and has been discharged under honorable conditions from service, in the United States Army, Navy, Air Force, Marine Corps, Coast Guard, or Revenue Marine (Revenue Cutter) Service; and served in any of the wars or campaigns listed here
- In time of war
- In time of peace in a campaign or expedition for which a medal has been issued to the veteran by Congress
- In time of peace and because of a service-connected disability was released from active duty
- Persons from the National Guard or National Guard Reserve who are called into active service as part of the Armed Forces of the United States may also qualify for the Veterans' Exemption
It also extends to unmarried surviving spouses or parents of deceased veterans who meet the service requirements. However, there is one caveat: if single, your total property value (real or personal) must not exceed $5,000; for married couples, the combined value cannot go beyond $10,000. This exemption has become increasingly unhelpful for homes bought after the 1940s (when the median home price was less than $3,000).
Disabled veterans’ exemption
If you’re a qualified veteran who has been rated 100% disabled or are being compensated at the 100% rate due to an injury or disease connected to your service, or if you’re an unmarried surviving spouse of a disabled veteran, you may be eligible for a property tax reduction through the Disabled Veterans' Exemption. This exemption has two levels: Basic ($134,706 for 2018) and Low-Income ($202,060 for 2018 with an annual household income limit of $60,490).
If you’re a resident of California aged 55 or over and you sell your primary residence, and buy a replacement property with an equal or lower market value within two years, you may transfer the base year value of your previous home to your new one—provided that your county allows it.
Decline in value
Under Proposition 8, if you experience a decrease in your property’s value as a result of a drastic decline in the real estate market or any sort of natural disaster (e.g. storms, wildfires, earthquakes), you may receive temporary relief through "decline-in-value" status which reduces the assessed value of your home.
Obtain your home from your family
If you acquire your primary residence from your family—either by children transferring the property to a parent, or vice versa—then the home's taxable value will not be recalculated. If both your parents have passed away, you may get this benefit if you receive a house from your grandparents.
Who Pays the Most/Least Amount of Property Tax in CA?
The most property taxes in California are paid by commercial and industrial property owners, who typically pay about two to three times more than residential property owners. The least amount of property taxes is typically paid by homeowners with low incomes or those that qualify for certain exemptions such as homestead exemption or senior citizen exemption.
According to tax-rates.org, “Marin County collects the highest property tax in California, levying an average of $5,500.00 (0.63% of median home value) yearly in property taxes, while Modoc County has the lowest property tax in the state, collecting an average tax of $953.00 (0.6% of median home value) per year.”
Do you still pay property taxes even after your home is paid off?
Yes! Your property taxes fund all the services available in your community. They also contribute to a stable source of revenue for local governments and keep overall tax rates low by providing an equitable way to spread the cost of government services across all property owners.
What happens if you don’t pay your property taxes?
In California, if you fail to pay your property taxes on time, the penalty is 10% of the amount due. Each successive missed payment will incur an additional 10%, and these penalties will accrue every six months with no payment made. Furthermore, any payments that are made must first be applied toward unpaid penalties before being used for the actual property tax amount.
There are other consequences to not paying your property taxes as well. These include:
The county may sell your house
If your outstanding tax balance remains unpaid for five years or more, the county may hold a tax sale auction and sell your home to the highest bidder.
The bank may foreclose
If you have taken out a loan for your home, your lender is financially invested in ensuring that you pay your property taxes. In most cases, if the house is sold at a tax sale, then the loan may be voided. Because of this, lenders are allowed to foreclose on homes before they go to tax sale so as to protect their investment. Although it isn't common, a foreclosure auction may still take place even if there was no tax sale involved.
The lender may pay your property taxes, and then charge you interest
If your taxes are not paid, your lender may intervene and pay the amount due at the last minute to protect their investment. This will result in you having to pay the original amount plus any penalties incurred as part of your loan repayment over its term.
Someone else could pay your property taxes and then acquire your house
If the property taxes are delinquent and someone living on your property for five or more years pays your property taxes, that gives them “squatters rights”—the ability for them to go before a judge and claim the home through “adverse possession.”
Have more questions about any stage of homeownership?
The Cassity team is here to guide you through every step of the homeownership process. Whether you need advice on current real estate trends or help with a complex transaction, our passion for San Diego real estate makes us the perfect partner.
We also specialize in maximizing your home's value when it comes time to sell—our marketing strategies include professional photography and video tours that showcase your property's best features. For a stress-free experience, get in touch whenever you’re ready.
Looking for additional insight into living in Southern California? We're here to help! Give us a call at (619)800-6178 and we'll be glad to assist.