Three Point Thursday #74
California Property Tax Rules: Brilliant or Broken?
Hi Friends,
Welcome back to the 74th edition of Three Point Thursday — your weekly mortgage, real estate, and business newsletter from your favorite local lender.
This week’s Three Points:
🔎How California Property Taxes Actually Work
📉Prop 13 & Prop 19: Why Your Neighbor Pays Less
🏡Property Spotlight
But first — let’s check in on rates.
*Examples are based on “top tier” scenarios (SFR, Primary, conforming, 25% down, 780 FICO, etc.) quoting with NO POINTS.
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THREE POINTS:
1️⃣ How Property Taxes Are Actually Calculated in California
I hear it all the time:
“Property taxes in California are 1% or 1.25% of the purchase price.”
Here’s what I say to that:
📌 1% is the base rate for the state.
📌 1.25% is a rough average that includes local add-ons.
But in high-cost areas like the Bay Area, that 1.25% estimate can seriously miss the mark.
Why? Because property taxes are reassessed at the time of sale — meaning the previous owner’s bill doesn’t matter. What you pay depends on the price you pay and the specific taxes tied to the property.
The total property tax bill has two parts:
A percentage-based tax rate, which varies by city
A fixed assessment amount, which varies by property
Here’s how to calculate it the right way:
Sales Price – Exemptions = Taxable Value
Taxable Value × City Tax Rate = Base Tax
Base Tax + Fixed Assessments = Total Annual Tax
📊 Let’s Run the Numbers:
Sales Price: $1,000,000
Primary Residence Exemption: $7,000
Taxable Value: $993,000
City Tax Rate (Alameda): 1.2085%
Base Tax: $12,000.41
Fixed Assessments: $1,600
Total Annual Tax: $13,600.41
💡 That gives this home an effective tax rate of 1.36% — not 1%.
Fixed assessments can range from $600 to $6,000 in the Bay Area, so always pull the tax bill and do the math before you make an offer.
📍 Click here to see Bay Area city tax rates
2️⃣ Prop 13 & Prop 19: Why Your Neighbor Pays Less
Imagine this: You just bought a house and see your neighbor’s property listed on Zillow. You check the tax history and… they’re paying $2,500/year while you’re paying $13,000 — for the same house.
Here’s why:
🧱 Prop 13: The Tax Shield
Passed in 1978, Prop 13:
Locks your base tax at 1% of the purchase price (plus local add-ons)
Caps taxable value increases at 2% per year
Ignores market value increases
📌 Stay put long enough, and your tax bill barely moves.
🔄 Prop 19: The Shake-Up
Age 55+ homeowners can transfer their low tax base to a new home — up to 3 times, anywhere in CA
Inherited homes only keep the tax base if the kids move in
💡 Bottom line:
Prop 13 rewards long-term ownership.
Prop 19 helps downsizing — but tightens up inherited property rules.
Need help running the numbers? Just reply — I’ll simplify it for you.
3️⃣ Property Spotlight
Who wants to go splitsies on this $7.5M summer lake house?
Asking for a friend... named Chris.
If you’re looking to get started on your home-buying journey, trying to move up, or need to refinance, you can schedule a call by clicking the link below.
Now get out there, keep shooting your shot🎯, and tell your friends about the newsletter!
See you next week.
Chris Granger
📧 cgranger@xperthomelending.com
🏡 Xpert Home Lending | NMLS #952015
🔗 chrisgrangermortgage.com