Is my appraised value the same as my tax assessed value in California?

Two numbers with two different jobs

Your property tax bill and your appraisal both put a dollar figure on your house. That is about all they have in common.

The assessed value is the number the county assessor uses to calculate your property tax. In California it is set by a formula that Proposition 13 created in 1978. It mostly looks backward: what was the home worth when you bought it or built it?

The appraised value is an appraiser's opinion of market value as of a specific date. I look at what similar homes nearby actually sold for and adjust for the differences. It looks at right now.

One number is a tax formula. The other is a read on the market. Asking which one is "right" is like asking whether your driver's license photo or your current face is the real you. Both are you. One is just from a while ago.

How Prop 13 sets your assessed value

The California State Board of Equalization (BOE) explains the system in its property tax guide. The basics:

• Base year value. Your starting point is the home's market value when you bought it, when it was newly built, or as of the 1975 lien date if it has not changed hands since then.
• The 2 percent cap. Each year, the base year value is adjusted for inflation, but generally by no more than 2 percent.
• The tax rate. The basic property tax is 1 percent of the taxable value, plus any voter-approved debt in your area.
• Reassessment triggers. The assessor must reassess to current market value when there is a change in ownership. Completed new construction is also reassessed.

Here is a hypothetical. Say you bought a house for $300,000 twenty years ago and it never changed hands or added on. With 2 percent increases every year, the factored base year value would be a little under $446,000. Whether the market went up 20 percent or 200 percent in that time, the formula does not care.

Why long-time owners see a big gap

The BOE's guide defines taxable value as the lower of two numbers: the factored base year value (your purchase value plus those yearly increases) or the property's full market value on the lien date.

In practice, that means two things.

First, when prices climb faster than 2 percent a year, the market runs ahead of the assessment. Hold the house long enough and the gap can get large. That is why your neighbor who bought in the 1990s may pay a fraction of the tax you pay on a nearly identical house. Same street, same floor plan, very different bill. It makes for awkward block parties.

Second, when the market drops below your factored base year value, the assessor can lower your assessed value to recognize the decline.

Neither of those changes what a buyer would pay for your house. Buyers do not ask to see your tax bill before they write an offer. They look at what similar homes sold for.

What I see in the field

Homeowners sometimes hand me their tax bill and say, "Here's the value." I appreciate the help, but I do not use the assessed value to reach market value. It is the output of a formula, not a sale. Facts over feelings, and in this case, sales over formulas.

The assessor's record is still useful to me for other things. It can show the recorded lot size, the year built, the room count and the date of the last sale. I compare those facts to what I see on site, because county records are sometimes out of date. A 1990s family room addition that never made it onto the record is more common than you would think.

The gap also matters in estate and trust work. When a house passes to heirs or is sold, the questions of reassessment, exclusions and taxes get specific fast. The BOE describes exclusions such as certain parent to child transfers, and Proposition 19 rules for some owners over 55 or with a disability. Those rules have conditions and filing deadlines, so talk to your CPA or attorney before you assume anything.

What to do with each number

1. Selling, buying, refinancing or settling an estate? Use a current appraisal or a solid market analysis. Your assessed value will usually understate what the market will pay if you have owned the home a long time.
2. Check your assessor record for facts. Square footage, bedrooms, baths and lot size. If something is wrong, it is worth knowing before an appraiser or buyer finds it.
3. Think the market fell below your assessed value? Contact your county assessor first. The BOE notes you can discuss it informally with the assessor's staff, and you can also file an assessment appeal with the county clerk of the board during the filing period, which runs from July 2 to September 15 or November 30 depending on your county.
4. Just bought? Expect a supplemental tax bill. The BOE explains that a reassessment after a purchase creates a supplemental assessment for the difference between the new base year value and the old taxable value.
5. Inherited a home? Get a date of death appraisal for tax purposes and ask your CPA or attorney about reassessment exclusions before the deadlines pass.