Buying a Home in San Jose? Be Ready for a Property Tax Reset

Closing on a home in San Jose is an exciting milestone, but for many first-time and move-up buyers, a major surprise awaits after the deal is done: a higher property tax bill. That’s because in California, buying a home triggers a property tax reassessment under Proposition 13. If you’re not expecting it, this tax increase—and the additional supplemental bill—can feel like a curveball.

This guide will explain how property taxes really work in California, what happens after a purchase in San Jose, and how you can estimate your future tax payments so you’re not caught off guard.

Prop 13 Explained: The Basics of California Property Tax Law

Passed in 1978, Proposition 13 limits how much property taxes can increase for homeowners each year. It’s one of the most important (and often misunderstood) laws in California real estate.

Here’s what Prop 13 does:

• Caps the annual increase in assessed value to 2% per year

• Limits property taxes to roughly 1% of the assessed value, plus local assessments or special taxes

But—and this is crucial—when a property changes ownership, it is reassessed at the new market value.

For Example:

• A home bought in 1990 for $300,000 might have a current assessed value of $500,000 due to the 2% cap.

• If that home sells today for $1.4 million, the new buyer’s property will be reassessed at the full $1.4 million.

This triggers a major increase in property taxes, which new owners must prepare for.

What Is Property Tax Reassessment in San Jose?

When you buy a home in San Jose, the Santa Clara County Assessor’s Office reassesses the property based on the purchase price, not the prior owner’s assessment.

What Happens After Purchase:

• The county is notified of the sale.

• The Assessor revalues the home based on your purchase price.

• The new assessed value becomes the basis for your annual property tax bill.

In San Jose, where the median home price is over $1.3 million, this means many buyers go from low historical tax assessments to tens of thousands per year in new taxes.

What Is a Supplemental Property Tax Bill?

One surprise that trips up new buyers? The supplemental tax bill.

What it is:

• It’s a one-time tax bill that covers the difference in taxes between the old owner’s tax rate and your new reassessed rate.

• It covers the time period from your closing date to the end of the fiscal year (June 30).

• It is billed separately—you won’t receive it at closing, and your lender won’t necessarily escrow for it.

When to Expect It:

• Usually arrives within 6–9 months after your purchase

• You may receive two separate bills if your purchase crosses fiscal years

This supplemental bill often ranges from a few thousand to over $10,000, depending on the price difference between the previous and current assessments.

Estimating Your New Property Tax in San Jose

Want to avoid sticker shock? Here’s a simple way to estimate what your annual property taxes will be after reassessment:

Step 1: Start with the Purchase Price

Let’s say you buy a home for $1,400,000.

Step 2: Multiply by the Base Tax Rate (~1%)

1% of $1,400,000 = $14,000/year

Step 3: Add Local Assessments (Usually 0.1–0.3%)

Common local fees include:

• School bonds

• San Jose general obligation bonds

• Community services assessments

Let’s say these total 0.25%, or $3,500.

Estimated Total Annual Property Tax:

$14,000 (base) + $3,500 (special assessments) = $17,500/year

Note: Tax rates vary slightly by neighborhood. You can check your specific tax rate on the Santa Clara County Assessor’s website.

Do You Need to Budget for Supplemental Taxes?

Yes. Many buyers overlook this expense because:

• It’s not part of closing costs

• It’s not paid monthly with your mortgage

• It arrives months after closing

If you’re using all your savings for the down payment, this surprise bill can strain your finances. That’s why it’s smart to budget for 6–12 months of additional tax expenses post-purchase.

Can Property Taxes Go Down After Reassessment?

Rarely—but yes, in some cases:

• If the purchase price was lower than market value and you successfully appeal

• If market values drop significantly, you may qualify for a temporary reduction under Prop 8

However, reductions are uncommon in competitive markets like San Jose. Be prepared for steady annual increases capped at 2% moving forward.

How New Homeowners Can Prepare

To avoid surprises after buying a home in San Jose, follow these tips:

✅ Ask for a Tax Estimate Before You Buy

Your real estate agent or lender can help you estimate your new tax rate based on your offer price and neighborhood.

✅ Budget for Supplemental Taxes

Set aside 0.5%–1% of the purchase price to cover your supplemental bill.

✅ Check the Parcel’s Prior Assessed Value

You can look this up through the Santa Clara County Assessor’s Office to understand the gap between prior and new taxes.

✅ Talk to a CPA or Tax Advisor

For high-value homes, property taxes may impact your deductions and future capital gains. A tax professional can help you plan smartly.

What About Prop 19? Can I Transfer My Tax Base?

Proposition 19, passed in 2021, allows some homeowners aged 55+, the severely disabled, or wildfire victims to transfer their current property tax base to a new home in California.

If you qualify:

• You can purchase a home of equal or lesser value and maintain your old tax rate.

• Or, if the new home is more expensive, you’ll pay an adjusted rate on the difference.

This can offer massive savings—but only applies to eligible buyers. Check with the County Assessor’s Office to see if you qualify.

Know Before You Buy

In San Jose, where home values are among the highest in the country, property tax reassessment can mean thousands more per year in costs. For new buyers, understanding Proposition 13, supplemental tax bills, and local tax rates is crucial to long-term financial planning.

Whether you're a first-time buyer or relocating from another part of California, budgeting for reassessment and understanding your tax exposure helps you buy smarter and avoid post-closing surprises.

When in doubt, consult with Block Change Real Estate—and don’t let tax confusion cloud the excitement of your new home.