As we head into 2025, California homeowners are bracing for a surge in property tax rates. Over the years, the Golden State has seen substantial increases in property values, and with those increases, homeowners are also experiencing higher property taxes.
Here’s a breakdown of what’s happening, why it’s happening, and what homeowners need to know to navigate the changes.
Why Are Property Taxes Rising in California?
In California, property taxes are primarily governed by Proposition 13, which limits the tax rate on properties to 1% of the assessed value, plus any voter-approved bonds and taxes. While the base rate has remained consistent, the assessed value of a home can rise with the market. This means that when the real estate market booms, as it has in recent years, property taxes can increase substantially.
In addition to this, local governments have struggled with rising expenses for essential services such as education, public safety, and infrastructure, leading them to seek out additional funding through increased assessments. As the economy continues to recover and property values increase, homeowners are seeing the impact in their tax bills.
What’s Driving the Increase?
Several factors contribute to the property tax hikes California homeowners are facing:
- Rising Home Values: Over the past few years, California’s real estate market has seen skyrocketing home prices, particularly in urban centers like Los Angeles, San Francisco, and San Diego. When home values increase, so does the amount homeowners pay in property taxes.
- Inflation and Economic Factors: Inflation has caused costs to rise across the board, including property-related expenses like maintenance, labor, and materials. Local governments are raising property taxes in response to these rising costs, in part to meet the increasing demand for public services.
- Voter-Approved Bonds: In some areas, voters have approved new bonds to fund things like local schools or public infrastructure projects. These bonds add to homeowners’ property tax bills.
- Assessment Increases: Homeowners who bought their property when values were lower are seeing significant assessment increases as their property values catch up to current market conditions.
How Much Are Taxes Expected to Increase in 2025?
While the exact amount of the increase will vary depending on location and individual property assessments, experts predict that many homeowners in California will face tax increases ranging from 2% to 6% in 2025. These hikes are the result of both rising home values and local government funding needs. In highly sought-after real estate areas, such as those along the coast or near tech hubs, property tax increases could be even higher.
What Does This Mean for Homeowners?
The rising property taxes are already straining many homeowners’ budgets. For those living in high-value homes, this means a potentially huge increase in their annual tax bill, often amounting to thousands of dollars more each year. Homeowners on fixed incomes or in areas where wages haven’t kept pace with housing costs are particularly vulnerable.
In addition, the property tax increases are also making it harder for first-time homebuyers to enter the market. As taxes go up, so do the overall costs of homeownership, pushing some out of the market altogether.
What Can Homeowners Do?
While rising property taxes may seem inevitable, there are steps that homeowners can take to manage the impact:
- Appeal Your Property Tax Assessment: Homeowners can challenge their property’s assessed value if they believe it’s too high. In California, the County Assessor will mail out a Notice of Assessed Value each year. If you believe that your home is being overvalued, you can file an appeal to have your property’s value reassessed.
- Explore Property Tax Exemptions: California offers various property tax exemptions, including the Homeowners’ Exemption, which can reduce the taxable value of a home by up to $7,000 for primary residences. Seniors and veterans may also qualify for additional exemptions or tax deferrals, depending on their circumstances.
- Consider Property Tax Payment Plans: Some counties offer payment plans for property taxes, allowing homeowners to pay in installments rather than in a lump sum. This can help homeowners better manage the financial burden.
- Monitor Local Ballots for Future Changes: Since many property tax increases come from voter-approved bonds or measures, staying informed about local elections and voting on measures that align with your financial interests can have an impact in the future.
As property values continue to rise, so do the property taxes that California homeowners must pay. While Proposition 13 provides some level of protection, it’s clear that local governments are facing challenges in funding public services, which has led to increased assessments. With the expected increase in property taxes in 2025, homeowners will need to stay proactive in managing their finances and understanding the resources available to challenge unfair assessments or seek exemptions.
For many, the rising costs of homeownership will be a significant financial strain. But by understanding the factors at play and taking advantage of available options, homeowners can mitigate some of the impact and prepare for what lies ahead in California’s evolving real estate market.
