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Temporary Decline in Market Value
When the fair market value of property falls below the current adjusted base year value, the County Assessor is allowed to temporarily reduce the value on the Tax Roll which temporarily reduces your property taxes.
This process of reviewing property is sometimes referred to as "the Prop 8 review process" because of its association with temporary declines in taxable value allowed by the passage of Proposition 8 in 1978.
Questions about changes in your assessed value?
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In 1978 Californians passed Proposition 13, amending the State Constitution so that the yearly taxable value of most real property in California must be the lower of either:
- The property's base year value adjusted for current inflation, or
- The property's fair market value on January 1st (the "lien date") for the applicable tax year.
Base Year Value
The base year value is established when a property is sold, changes ownership, or undergoes new construction. If none of these has occurred since 1975, the base year value is the market value of the property as of March 1, 1975. Real property market values typically increase over the years, but sometimes the fair market value of a property falls below its current adjusted base year value. Proposition 8, also passed in 1978, allows for temporary declines in value which Proposition 13 did not address.
The law established by Proposition 8 allows the County Assessor to reduce your property taxes by enrolling a value on the Tax Roll that reflects a temporary reduction in taxable value for your property (see California's Revenue and Taxation Code, Section 51). Once reduced in this way, your property's value must be reviewed on January 1 each following year to determine whether its current market value is still less than its current adjusted base year value. When its market value increases above its adjusted base year value, the Assessor will once again enroll its adjusted base year value. Prop 8, values can change from year to year as the market fluctuates up and down, but under no circumstances does the Assessor assess your property at a value greater than it's adjusted base year value.
Temporary Reductions in Value
Temporary reductions to your property's taxable value on the Assessment Roll can be initiated by either you, or the Assessor. You can provide us with evidence that you feel justifies a reduction in your property value, or simply request us to review it. We also initiate reviews on our own. Our office constantly monitors market conditions and frequently lowers assessed values without requests from owners.
How Your Assessed Value Changes
If your assessable value increased this year and nothing has changed on the property (no new construction, no change in ownership), you may ask, why does my bill keep increasing? Aren’t my property taxes based on my purchase price?
There are a couple scenarios that would cause an increase in your assessable value, and therefore increase your tax bill. When you purchased your property, the current market value (typically the purchase price adjusted annually for inflation, not to exceed 2% per year), was enrolled as the base year for your assessable value. Under Proposition 13, the assessable value increases annually no more than 2% based on the Consumer Price Index. This inflation rate built into Proposition 13 may be the reason why your annual tax bill is increasing.
Another scenario is if your property’s base year was greater than the current market value in any previous year, then it was placed in Prop 8 status (temporary reduction of assessable value based on current market conditions). When a property is in Prop 8 there is no restriction on the percentage of increase or decrease from year to year as it is based on the market value of the property as of January 1st. Each year that temporary Decline Value is compared to your Base Year Value Factored, and the lower of the two are enrolled for the next tax year. Please see the FAQs on Value Decline for more information on Prop 8.
How Property Values are Assessed
New home purchase, remodeling, adding square footage, and other factors can affect the assessed value of your home. People often wonder why the assessed value of the homes in their neighborhood can be so different. The process of how Property Values are Assessed can be complex.
Temporary Decline in Market Value Review
Think your property assessment is too high? Learn about your rights and how the Temporary Decline in Value Review works.