Property Tax Cap Explained: How States Limit Annual Increases
TL;DR
Many states cap how much your property tax or assessed value can increase each year. California limits assessed value increases to 2% annually (Prop 13). Florida caps at 3% for homesteaded properties (Save Our Homes). Michigan caps taxable value increases at 5% or inflation, whichever is less. These caps protect long-term homeowners from sudden tax spikes but typically reset when the property is sold. Not all states have caps, and the rules vary significantly.
Types of Property Tax Caps
States use three different approaches to limit property tax increases:
| Cap Type | What It Limits | Example States |
|---|---|---|
| Assessment cap | How much assessed value can increase per year | California, Florida, Michigan, Oregon |
| Rate cap | The maximum tax rate that can be applied | California, Oregon, Indiana |
| Levy/revenue cap | Total revenue a taxing authority can collect | Massachusetts, Colorado, Washington |
Assessment Caps by State
California - Proposition 13
The most famous property tax cap in the country. Under Prop 13:
- Assessed value is set at market value when purchased
- Annual increases limited to 2% maximum
- Reassessment to current market value only occurs on change of ownership or new construction
- Tax rate capped at 1% of assessed value (plus voter-approved bonds)
This means a home bought in 1990 for $200,000 might have an assessed value of $400,000 today, even if its market value is $1.2 million. The owner pays taxes on $400,000.
Florida - Save Our Homes
- Assessment increases capped at 3% or CPI, whichever is less, for homesteaded properties
- Non-homesteaded properties capped at 10% per year
- Cap resets to market value when the property is sold
- Portability: you can transfer up to $500,000 of accumulated savings to a new homesteaded property in Florida
Michigan - Proposal A
- Taxable value increases capped at 5% or CPI, whichever is less
- Cap resets to State Equalized Value (50% of market value) when property transfers
- This "uncapping" can cause a dramatic tax increase for new owners
Oregon - Measure 50
- Assessed value capped at 3% annual growth
- Significant gap can develop between assessed value and real market value
- New construction and major improvements assessed at market value
Other States With Assessment Caps
| State | Cap | Applies To |
|---|---|---|
| Arkansas | 5% per year (10% for non-homestead) | Homestead properties |
| Georgia | Varies by county (some have local caps) | Homestead |
| Maryland | 10% per year (Homestead Tax Credit) | All owner-occupied |
| Nevada | 3% for primary residence, 8% for others | Tax bill amount |
| New York | 6% per year / 20% over 5 years (some classes) | NYC residential (Class 1) |
| South Carolina | 15% in any 5-year period | Owner-occupied |
| Texas | 10% per year (20% for non-homestead, as of 2024) | Homestead properties |
When Caps Reset
Assessment caps almost always reset when the property changes hands. This means:
- The new owner's assessment starts at current market value
- The annual cap begins fresh from that new base
- Long-term owners who benefited from decades of capped increases see those savings disappear at sale
This creates a "lock-in effect" where homeowners are discouraged from selling because their new property will be assessed at full market value. California partially addressed this with Proposition 19, which allows some homeowners to transfer their low Prop 13 assessment to a new home.
Caps Do Not Prevent All Increases
Even with a cap in place, your property tax bill can still go up because:
- Tax rate increases: An assessment cap does not limit the tax rate. If your local government raises the rate, your bill goes up even if your assessment is capped.
- New voter-approved levies: Bond measures and special assessments are usually exempt from caps.
- Improvements: Adding square footage, a pool, or other improvements triggers a partial reassessment on the new value.
- Errors corrected: If the assessor discovers previously unreported improvements, they can add value.
States Without Caps
Many states have no cap on assessment increases. In these states, your assessed value can jump to full market value at any reassessment. States without meaningful caps include New Hampshire, Vermont, Connecticut, and several others. Homeowners in these states are more vulnerable to sudden, large tax increases after a reassessment.
Caps and Over-Assessment
Assessment caps protect you from increases, but they do not protect you from being over-assessed in the first place. If your initial assessment (or most recent uncapped assessment) was set too high, the cap locks in that inflated value. You will be overpaying every year, capped at the wrong number.
This is why appealing an over-assessment is especially important in cap states. Getting the base value right means every future year benefits from the correction.
Check whether your assessment is accurate with our free property tax analyzer. If your assessed value is higher than it should be, an appeal could save you money not just this year but for as long as you own the home.
Your Next Steps
Put this information to work this week:
- Review your assessment notice. Check every detail: assessed value, property characteristics, square footage, lot size. Errors are more common than you think and they directly inflate your tax bill.
- Pull comparable sales. Find 3 to 5 similar properties near you that sold recently for less than your assessed value. This is the strongest evidence for any appeal.
- Check your exemption status. Contact your county assessor to confirm which exemptions are on file for your property. You may qualify for programs you have not applied for.
- Set a deadline reminder. Find your appeal deadline and put it on your calendar with a 2-week advance warning. Missing it costs you a full year of potential savings.
Why Timing Matters
Property tax appeals have strict deadlines, and procrastination is the number one reason homeowners miss their chance to save. Once the filing window closes, there is no extension and no second chance until next year. That is another 12 months of overpaying.
The homeowners who save the most money treat their assessment notice as a call to action. They review it immediately, check for errors, pull comparable sales within the first week, and file their appeal well before the deadline. This approach leaves time to gather additional evidence if needed and avoids the last-minute scramble that leads to weak cases.
If your deadline has already passed for this year, do not wait until next year's notice arrives to start preparing. Begin gathering comparable sales data now. When your next notice arrives, you will be ready to file immediately with strong evidence already in hand.
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Frequently Asked Questions
What are the different types of types of property tax caps?
States use three different approaches to limit property tax increases: assessment caps that limit how much assessed value can increase per year, rate caps that set a maximum tax rate, and levy/revenue caps that limit the total revenue a taxing authority can collect.
What are the different types of types of property tax caps?
The most famous property tax cap is California's Proposition 13, which sets the assessed value at market value when purchased and limits annual increases to 2% maximum. Reassessment to current market value only occurs on change of ownership or new construction, and the tax rate is capped at 1% of the assessed value.
When Caps Reset?
Assessment caps almost always reset when the property changes hands. This means the new owner's assessment starts at current market value and the annual cap begins fresh from that new base. Long-term owners who benefited from decades of capped increases see those savings disappear at sale, creating a 'lock-in effect' where homeowners are discouraged from selling.
When Caps Reset?
Even with a cap in place, your property tax bill can still go up because tax rate increases are not limited by the cap, new voter-approved levies like bond measures and special assessments are usually exempt from caps, and adding improvements to the property can increase the assessed value.
How do property tax caps work?
Many states have caps on assessment increases, so your assessed value can't jump to full market value at a reassessment. This protects homeowners from sudden, large tax increases after a reassessment. However, caps don't protect you from being over-assessed in the first place.
What states have no property tax caps?
Some states have no cap on assessment increases, so your assessed value can jump to full market value at any reassessment. Homeowners in these states are more vulnerable to sudden, large tax increases after a reassessment. States without meaningful caps include New Hampshire, Vermont, Connecticut, and several others.
Can assessment caps lead to over-assessment?
Assessment caps protect you from increases, but they do not protect you from being over-assessed in the first place. If your initial assessment (or most recent uncapped assessment) was set too high, the cap locks in that inflated value. You will be over-paying taxes as a result.