California homeowners pay an annual levy on the assessed value of their real estate. This charge, based on Proposition 13 passed in 1978, generally starts at 1% of the assessed value at the time of purchase or new construction, with increases capped at 2% per year. This assessment can be reassessed to market value upon sale or transfer of ownership. For example, a home purchased for $500,000 would have an initial tax assessment of approximately $5,000, subject to the annual 2% inflationary cap.
These levies are essential for funding vital public services. Revenue generated supports local governments and special districts, providing crucial resources for schools, fire departments, libraries, and other community infrastructure. The stability provided by Proposition 13 offers homeowners predictable tax increases, protecting them from drastic fluctuations in the housing market. However, the system has also been debated due to its impact on long-term revenue generation for local municipalities and potential disparities between long-term and newer homeowners.