Nobody wants to think about paying taxes, but there’s no getting around it. If you are a homeowner, property taxes are just another facet of homeownership you need to deal with. But, we understand that it can get confusing. When are property taxes due? How are they calculated? What are the penalties if you miss a deadline?

We wrote this article to answer these questions. By the end, you will know how property taxes work in California, how they are calculated, when they are due, and the penalties if you miss deadlines, plus you’ll get some tips on how you can avoid delinquent payments. So let’s get started.

How Are Property Taxes Calculated in California?

Property taxes are calculated based on the value of your home at the time of purchase, annual increases to the value, and additional voter-approved levies that are specific to each area. In California, you pay 1% of your assessed home value in property taxes. The additional voter-approved levies are typically between 0% and 0.5% of the assessed value.

The assessed value of your home increases annually, which is why your property tax bills are not the same each year. We should note that the assessed value of a home, even with the annual increases, is not the same as the fair market value of your property. So let’s explain all the components of your property taxes.

What Is the Assessed Value of a Home?

When you buy a property, the County Assessor determines it’s value. The assessed value will typically be the same as the purchase price, unless there is a very significant discrepancy between the purchase price and the fair market value of the property. This value is called the base year value. So, the base year value of your property is the value at the time of purchase.

The assessed value of your home for tax purposes is the base year value with added annual increases. This is called the factored base value. This is important because your property taxes are calculated based on the factored base value and not on the fair market price of the property in the current real estate market.

How Is the Added Value Calculated?

Value is added yearly to your home’s base year value based on the inflation rate that is measured by the California Consumer Price Index. So, as the inflation rate rises, so does the value of your home, as well as the property taxes that you need to pay.

However, Proposition 13, an amendment to the California Constitution from 1978, capped the annual increase at 2%, regardless of the inflation rate. Thus, your factored base value (the one which is used to calculate your property taxes) cannot be higher than 2% compared to the previous year.

Proposition 13 is one of California’s most important tax amendments because it safeguards people from paying unreasonably high property taxes due to changing market conditions (and potentially even losing their homes as a consequence). While the amendment was introduced over 50 years ago, it is still as important today.

Just think of the circumstances of the last few years and how real estate prices have skyrocketed. You don’t feel it too much on your property tax bills because of the 2% yearly increase cap. But what would happen if that safeguard wasn’t in place?

Let’s say the assessed value of your home for tax purposes increased by 10% in 2019, 2020, 2021, and 2022 (in practice, it would have been even higher). These increases are cumulative, so your property tax bills would increase exponentially. However, as a result of Proposition 13 and the 2% cap, California has some of the lowest property taxes, percentage-wise.

Additional Levies on Your Property Tax Bills

On top of the general property taxes you pay, there are additional levies that will be added to your tax bill. These additional levies are based on the district where your property is located. They are approved by the constituency of the district and are typically used to fund community services, like education and transportation.

Because these additional levies are a result of local regulations, there is no exact calculation that we can give. Most counties have websites (often the County Assessor’s website) where you can find the exact tax rates for your district. However, these additional levies are generally between 0% and 0.5%, so you can make a rough estimate.

Bringing It All Together

To sum it up, the two components of your property taxes are:

• The yearly base value - the value of the property at the time of purchase;
• The factored base value – the value of the property with increases capped at 2% annually.

In California, you pay 1% of the factored base value in general property taxes and possibly have additional district-specific levies. So, the formula used to calculate your yearly property taxes is:

• 1% of the factored base value + added district levies (typically up to 0.5%)

Let’s give an example to make it even clearer:

• You bought a house in 2020 for $200,000 (that is your base year value).
• The additional levies in your district are 0.5% of the property’s value.
• In 2020, you would pay $3,000 in property taxes (1% in general taxes + the additional 0.5%).
• In 2021, the value of your home increases but is capped at 2%. So, the factored base value of your home is $204,000 and you would pay $3,060 (1% in general taxes + the additional 0.5%).
• In 2022, the factored based value is $208,080 and you would pay $3,121 (1% in general taxes + the additional 0.5%).

This would continue for as long as you owned the house.

One More Important Tip

The base year value of a property is assessed when it changes owners. Thus, when you buy a house, there is a new assessment made which is the basis for property taxes. Because property appreciates much faster than the factored base value (as it is capped at 2% annually), you will be paying significantly higher property taxes than the previous owner.

When Are Property Taxes Due in California?

By now, you know how property taxes are collected, but when are property taxes due in California? The fiscal year is divided into two parts, July 1st (start of the fiscal year) to December 31st and January 1st to June 30th (end of the fiscal year).

• For the first half, property taxes are due on November 1st and become delinquent if unpaid by December 10th
• For the second half, property taxes are due on February 1st and become delinquent if unpaid by March 10th

Additionally, you can pay both instalments when the first instalment is due without waiting for the second bill.

Important: Your local Treasurer-Tax Collector office should mail your property tax bills. However, pursuant to California law, it is the taxpayer’s responsibility to obtain all tax bills and pay them on time. So if you don’t get your bills in the mail, you should contact the appropriate public office for your county.

What Happens if You Miss Your Property Tax Due Date?

In case you miss the deadline and your taxes become delinquent, you will get a 10% penalty after December 10th and March 10th. In case you haven’t paid your delinquent taxes from the previous fiscal year when the new fiscal years starts, they will be transferred to the defaulted tax roll and you will get an additional 1.5% monthly penalty on any unpaid amount.

What’s the Easiest Way to Pay Property Taxes and Avoid Penalties?

Having an escrow account that you use to pay property taxes is the easiest way to avoid any late fees or stress about paying your taxes on time. Lightspeed Escrow is a professional escrow service that can take care of all of your needs at minimal cost. Contact us to open an impound account and stop worrying about paying your property taxes.