Introduction
California’s real estate prices are among the highest in the nation—but thanks to Proposition 13, long-time homeowners and investors can pay significantly less in property taxes. Understanding how Prop 13 works in 2025 can help you preserve low property tax bills, plan your estate, or structure real estate deals more efficiently.
What Is Proposition 13?
Applicable Code: California Constitution, Article XIII A
Passed in 1978, Proposition 13 limits general property taxes to 1% of a property’s assessed value, and restricts annual increases in assessed value to no more than 2% per year, unless a change in ownership or new construction occurs.
- How Prop 13 Limits Property Taxes
- Base year value is established when the property is purchased
- Property tax is capped at 1% of assessed value, plus voter-approved local taxes
- Annual increases are limited to 2%, even if the property appreciates at a higher market rate
Example:
A home purchased in 2000 for $400,000 may have an assessed value of ~$600,000 in 2025, even if the market value is $1.5 million.
Annual property taxes: $6,000–$7,500, not $15,000+
Prop 13 and Property Transfers
A reassessment of property tax value usually occurs when:
- The property is sold to a new owner
- There is a transfer between unrelated parties
- A business entity changes majority ownership
But not all transfers trigger reassessment. Certain intra-family and legal transfers can preserve Prop 13 protections.
Parent-to-Child Exclusion and Prop 19
Under Proposition 19, which went into effect in 2021:
- Parents can transfer their primary residence to children without reassessment, if the child makes it their primary residence within one year
- There is a value cap of $1 million over the original assessed value
- Transfers of rental or investment properties now trigger reassessment in most cases
To claim the exclusion, you must file Form BOE-19-B within 3 years of the transfer.
Long-Term Ownership vs. New Purchases
If you’ve owned a property for many years, Prop 13 protects you from skyrocketing tax bills.
However, if you’re buying a new home in 2025, your property tax will be based on the purchase price, subject to Prop 13’s 2% annual increase cap going forward.
Homeowners aged 55+ can also transfer their base year value to a new home anywhere in California (thanks to Prop 19), up to three times in their lifetime.
Step-by-Step Guide to Preserve Your Prop 13 Benefits
Step 1: Verify your current assessed value and tax bill on your county assessor’s website
Step 2: If transferring property to children or grandchildren, file exclusion claims (BOE-19-B) timely
Step 3: If over age 55, use Prop 19 portability to transfer your low tax base when downsizing or moving
Step 4: Avoid triggering reassessment through entity restructuring, gifting, or trust planning without legal review
Step 5: Consult a CPA or real estate attorney for strategies to minimize reassessment risks and preserve long-term tax savings
Conclusion
Proposition 13 remains one of the most powerful tax-saving tools for California property owners. Whether you’re keeping property in the family or buying a new home, knowing how to apply these rules can save you thousands each year in 2025 and beyond.
Call to Action
Thinking about transferring property or concerned about reassessment?
Schedule a consultation with Anshul Goyal, CPA EA FCA, a U.S.-licensed CPA and IRS Enrolled Agent who helps clients reduce property tax exposure, file correct exclusion forms, and avoid costly mistakes when passing real estate to future generations.
📅 Book your appointment here
FAQs – Proposition 13 and Property Taxes
Q1: Does Prop 13 apply to rental or investment properties?
Yes. The 1% cap and 2% limit apply, but reassessment may occur if the property changes ownership.
Q2: Can I avoid reassessment when gifting property to my child?
Only for a primary residence, and only if the child makes it their primary residence and claims the Prop 19 exclusion.
Q3: Does Prop 13 apply to commercial properties?
Yes, unless California enacts future legislation to split-roll commercial real estate.
Q4: What form do I file to claim the parent-child exclusion?
Form BOE-19-B must be filed within 3 years of the transfer.
Q5: Can I transfer my property tax base to another county?
Yes. Under Prop 19, eligible homeowners over 55 can transfer their base value anywhere in the state.
About Our CPA
Anshul Goyal, CPA EA FCA is a U.S.-licensed Certified Public Accountant, IRS Enrolled Agent, and Fellow Chartered Accountant. With 15+ years of experience, Anshul helps California residents and property owners structure real estate transactions, protect low tax bases, and navigate Prop 13 and Prop 19 rules with confidence.
Disclaimer
This blog is for informational purposes only and does not constitute legal or tax advice. Property tax rules vary by county and situation. Always consult a qualified CPA or real estate attorney before transferring property or restructuring ownership.