As Prices Rise, So Do Taxes

As the housing market improves, many California homeowners will see the downside of the recovery: an increase in their property taxes.

Many homeowners believe their property taxes are limited to increases of no more than 2 percent annually because of Proposition 13, the landmark voter initiative approved in 1978.

The 2 percent limit set by Proposition 13 doesn't apply until the property's value reaches the level it would have hit if the real estate market never dropped.

The San Jose Mercury News Reported that more than 37,000 homeowners in Santa Clara County alone are seeing their property taxes rise by more than 2 percent this year because of the region’s rebounding real estate market.

The trend is helping those counties financially by allowing them to collect more property taxes, but is an unpleasant surprise to homeowners, who were happily watching their property values rise.