How Proposition 13 Changed California Property Taxes — and What Proposition 19 Did Next

Proposition 13, passed by California voters in June 1978, set a permanent 1% cap on property tax rates, limited annual tax increases to 2%, and locked each property's taxable value to what the owner paid for it. That system held for more than four decades. Proposition 19, passed in November 2020, kept Prop 13's core rules intact and made two targeted changes: it expanded the moving benefit for homeowners 55 and older, and it tightened the rules on passing a low tax bill to your children.

Key Facts

• Prop 13 (1978) capped the property tax rate at 1% of purchase price and limits annual increases to 2%.

• Your property's taxable value is based on what you paid — not what it's worth today.

• The gap between your taxable value and your home's market value grows every year you own it — and it represents real savings, often thousands of dollars annually.

• Prop 19 (2020) lets homeowners 55+ take that low tax base with them when they move anywhere in California.

• Prop 19 also restricted the parent-to-child inheritance benefit: your child must live in the home as their primary residence to keep your tax base.

What Problem Did Proposition 13 Solve?

Before 1978, California had no cap on property tax rates and no limit on how fast taxable values could rise. Counties reappraised properties on cycles as long as five years. A homeowner who bought at one value could find their tax bill reset to a much higher one at the next reappraisal — with little warning and no ceiling.

That system hurt long-time owners and retirees most. People on fixed incomes watched their tax bills climb alongside neighborhood sale prices they had nothing to do with. The fear of being taxed out of their own homes became real enough that voters passed Proposition 13 with nearly 65% support.

What Are Prop 13's Three Rules?

Prop 13 answered the crisis with three rules that still govern California property taxes today.

Rule 1: The rate cap. Property taxes cannot exceed 1% of a property's assessed value. Local additions can push the effective rate slightly higher, but the base rate is fixed.

Rule 2: The 2% annual cap. Your property's taxable value can increase by no more than 2% per year, no matter how fast the surrounding market rises.

Rule 3: The base year value. When you buy a property, the county sets your taxable value at your purchase price. That purchase price becomes your "base year value." As long as you own the property and no reassessment trigger occurs, your taxes grow at that slow 2% pace — not at market pace.

Together, these three rules created what tax professionals call the acquisition value system.

What Is the Acquisition Value System — and Why Does the Gap Matter?

The acquisition value system means your tax bill reflects what you paid, not what your home is worth now.

Here is a concrete example. A homeowner buys a Sacramento house in 1998 for $250,000. Her base year value starts at $250,000. By 2025, the house is worth $900,000. At 2% per year, her taxable value has grown to roughly $430,000 — not $900,000. Her annual tax bill is calculated on $430,000, not on the $900,000 market value.

The difference between those two numbers is the gap. On a $900,000 home with a $430,000 taxable value, the gap saves her roughly $4,700 per year — compared with what she would owe if her home were taxed at today's market value.

That gap is the benefit every California long-time homeowner carries. It can take decades to build and is worth protecting.

What Two Events Trigger a Reassessment?

Prop 13 protects your base year value unless one of two events occurs.

The first trigger is new construction. If you add a bedroom, build an ADU, or make other improvements, the county reassesses the new portion at current market value. Your existing base year value stays.

The second trigger is a change in ownership. When you sell your home, the county resets the taxable value to the sale price for the new owner. This is the pivotal rule. It means every sale restarts the clock — and it is why your low base year value disappears the moment you sell.

Where Does Proposition 19 Come In?

Before Prop 19, homeowners 55 and older could take their base year value with them when they moved — but only within the same county, and only to a home of equal or lesser value. That rule worked in some counties and left homeowners stuck in others.

Proposition 19 removed both restrictions. Now, a qualifying homeowner 55 or older can move anywhere in California and transfer their base year value to the new home — even if the new home costs more. The savings travel with you.

Prop 19 also changed what happens when you leave your home to your children. Under the old rules, children could inherit any property — including rentals — and keep the parent's tax base with no occupancy requirement. Under Prop 19, the inherited home must become the child's primary residence within one year for the low tax base to transfer. If the child rents the home out or leaves it vacant, the county reassesses it at market value.

Chapter 1 of Prop 19 Hero covers this history in full, with examples showing exactly how each rule applies to real families across California.

Summary

• Proposition 13 passed in 1978, capped property tax rates at 1%, limited annual increases to 2%, and tied each owner's taxable value to their purchase price.

• Long-time owners build a growing gap between taxable value and market value — a gap worth real money every year.

• Two events trigger a reassessment: new construction and a change in ownership.

• Proposition 19 expanded the moving benefit for homeowners 55+, allowing statewide moves and transfers to higher-value homes.

• Prop 19 restricted the parent-child inheritance benefit: the child must make the home their primary residence to keep the low tax base.

Get the Full Picture

Read the book. Prop 19 Hero walks you through every rule, every exception, and every calculation with plain-language explanations and real California examples. Find it on Amazon.

Talk to Bart. If you own a home in Sacramento and want to understand how Prop 19 affects your next move, Bart Hubbard can help you run the numbers before you list. Reach out at Prop19Hero.com.

About the Author

Bart Hubbard is a California real estate associate at HomeSmart ICARE Realty (DRE #01815497) and a C.A.R. Certified Probate & Trust Specialist. He wrote Prop 19 Hero to give California homeowners 55 and older a clear, practical guide to the property tax rules that affect every move they make. He works with buyers and sellers throughout the Sacramento area. Reach him at [email protected] or www.prop19hero.com.