Property Tax Caps and Limits by State

Property tax caps and limits are laws that restrict how much property taxes can increase from year to year. These measures are designed to protect homeowners from being taxed out of their homes during periods of rapid appreciation — but they also create significant side effects.

Types of Property Tax Limits

There are three main types of property tax limits:

• Assessment caps: Limit annual increases in assessed value. California's Proposition 13 (2% per year) and Florida's Save Our Homes (3% or CPI) are the most famous examples.
• Rate caps: Limit the maximum tax rate that can be applied. Some states constitutionally cap property tax rates at specific levels.
• Revenue caps: Limit total property tax revenue growth to a fixed percentage (often inflation plus population growth) or require voter approval for increases above the cap.

Proposition 13: The Original Cap

California's Proposition 13, passed in 1978, is the most influential property tax limit in American history. It capped property tax rates at 1% of assessed value and limited annual assessment increases to 2% for properties that do not change hands. When a property sells, it is reassessed at market value.

The result: longtime homeowners pay a fraction of what new buyers pay for identical properties. This has created massive inequities, with some homeowners paying taxes based on 1970s values while their neighbors pay full market rates. It has also reduced local government revenue, contributing to California's reliance on state income taxes.

The Trade-Offs

Property tax caps protect existing homeowners but create real problems:

• Reduced local revenue: Caps constrain funding for schools, roads, and public safety.
• Intergenerational inequity: Older homeowners benefit while younger buyers face higher relative burdens.
• Distorted housing markets: Caps discourage moving because selling triggers reassessment, reducing housing turnover.
• Uneven tax burdens: Identical homes can have wildly different tax bills based solely on ownership duration.

States With Notable Caps

Several states have significant property tax limitation measures:

• California: Prop 13 (1% rate cap, 2% assessment growth cap).
• Florida: Save Our Homes (3% or CPI assessment cap for homesteads).
• Texas: 10% annual assessment growth cap for homesteads.
• New York: Local option tax levy caps requiring supermajority votes to override.
• Colorado: Gallagher Amendment (repealed 2020) had historically limited residential assessment ratios.