Personal Finance & Estate › Income, gift, estate & real-estate taxes › Real-estate tax rules (depreciation, 1031, property tax)
Proposition 13 (California property-tax cap)
1978· Tax rule
Law or rule (2026)Set by statute, regulation or the agency; numbers change yearly.
California's 1978 ballot measure capping property tax at 1% of assessed value, with assessments rising at most 2% a year.
See it on the Personal Finance & Estate map →How it works
Assessed value is the purchase price (or 1975 value) plus at most 2% a year, regardless of market value; the base rate is 1%, plus local bonds and assessments. Reassessment happens only on a 'change in ownership' or new construction. For entities, that includes anyone gaining over 50% control of an LLC, or over 50% of original co-owners' interests changing hands over time; report on BOE-100-B within 90 days. A long-held building's low assessment can be worth millions.
Why it matters for you
It makes holding property cheap and transfers expensive; planning sales, gifts and inheritances around reassessment is central for California owners.
Think of it like
Like a below-market lease rate locked in at purchase: valuable, but it doesn't pass to the next owner.
Rules, limits and sources (2026)
California Constitution Article XIII A, passed June 6, 1978 with about 65% of the vote; upheld by the US Supreme Court in Nordlinger v. Hahn (1992); Revenue and Taxation Code Sec. 64 sets entity rules.
Watch out for
Whether commercial property should be taxed differently is still fought over; a 2020 'split roll' measure, Prop 15, narrowly failed.
Connections (3)
▸Proposition 13 (California property-tax cap) governs property tax in Real-estate tax rules (depreciation, 1031, property tax)Law or rule (2026)
How they connect
Prop 13 is the property-tax side of the playbook: a 1% base rate on an assessed value that rises at most 2% a year until a change in ownership. That makes reassessment risk central whenever a California owner sells, retitles into an LLC or trust, or passes property to heirs.
When it applies
Passed by California voters on June 6, 1978, led by Howard Jarvis and Paul Gann, amid soaring assessments.
The rule
California Constitution Article XIII A and the Revenue and Taxation Code; county assessors and the Board of Equalization apply it.
Watch out for
Whether Prop 13's benefits for long-held commercial property are fair, and how they affect housing and business turnover, is still debated.
▸Family LLC / family limited partnership can trigger reassessment under Proposition 13 (California property-tax cap)Watch out
How they connect
Moving a building into an LLC owned in the same proportions doesn't reassess it, but the owners become 'original co-owners'. Once more than 50% of those interests transfer, cumulatively, including gifts to children, the whole property is reassessed. Anyone gaining over 50% control also triggers it. Protection: track percentages and file BOE-100-B within 90 days.
When it applies
Built into the Revenue and Taxation Code soon after Prop 13 passed in 1978; enforced by the Board of Equalization's Legal Entity Ownership Program.
How sure?
Revenue and Taxation Code Secs. 62(a)(2) and 64(c)-(d); the BOE tracks entity filings and adds penalties for late reports.
Watch out for
Enforcement relies largely on self-reporting; how many entity changes go unnoticed, and whether lawmakers will tighten the rules, are open questions.
▸Proposition 19 (parent–child transfer limits) rewrote inheritance rules of Proposition 13 (California property-tax cap)Law or rule (2026)
How they connect
Prop 13 holds assessed value at the purchase price plus at most 2% a year, resetting only on a change in ownership. Props 58 and 193 had exempted transfers to children and grandchildren; Prop 19 replaced them, so most inherited property now resets to market value.
When it applies
Prop 13 passed in June 1978, Prop 58 in 1986, Prop 193 in 1996 and Prop 19 in November 2020.
The rule
California Constitution art. XIII A, secs. 2 and 2.1; county assessor records show reassessments of inherited property.
Watch out for
Whether ending the inheritance break makes Prop 13 fairer or hurts long-held family property is debated; property in LLCs follows separate rules.