Under State law (Proposition 13), real property is reappraised only when a change-in-ownership occurs, or upon completion of new construction. Except for these two instances property assessments cannot be increased by more than 2% annually, based on the California Consumer Price Index. The property tax rate is 1%, plus any bonds, fees, or special charges.
This adds up to approximately 1.2% of the purchase price. As a rule of thumb, you can calculate your monthly tax payment by dividing the purchase price by 1000. For example, if you purchase a $500,000 property, the taxes will be around $500 per month. Unlike some other states, different cities in California do not have greatly different tax rates.
Oh, and there is one HUGE difference in California – taxes go up only 2% a year, for as long as you own the home. It’s not like other states where they decide they need more money and re-assess your home. We own property in Florida where the taxes have doubled just because they have a hurricane. That cannot happen in California, there will never be an unexpected jump. Your taxes will go up 2% a year, never any more than that. So if your taxes are $500 a month, next year it will be $510 a month. That’s it.
In 1982, two state legislators, Sen. Henry Mello (Dem., Watsonville) and Assemblyman Mike Roos (Dem., West Hollywood) found a way around proposition 13 and affected passage of a bill known as the Community Facilities Act. This act authorized local governments and developers to create Community Facilities Districts for the purpose of selling tax-exempt bonds to fund public improvements. The homeowner then pays a supplemental tax bill to pay back the bonds.
Most new neighborhoods in San Diego County have Mello-Roos fees. These help pay for new roads, schools, parks, libraries, and other community services in developing areas. But they also affect the affordability of houses that have them. Some of the most important questions you can ask when house hunting are: how much is the Mello-Roos? how long does it last? and does it increase every year?