Property Tax Cap Explained: How States Limit Annual Increases

Property Tax Cap Explained: How States Limit Annual Increases

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.

Frequently Asked Questions

What should I know about property tax cap explained: how states limit annual increases?

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).

What are the different types of types of property tax caps?

States use three different approaches to limit property tax increases:

What should I know about assessment caps by state?

The most famous property tax cap in the country. Under Prop 13:

When Caps Reset?

Assessment caps almost always reset when the property changes hands. This means:

What should I know about caps do not prevent all increases?

Even with a cap in place, your property tax bill can still go up because:

What should I know about 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.

What should I know about 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.