Proposition 19, also known as the Property Tax Transfers, Exemptions, and Revenue for Wildfire Agencies and Counties Amendment, was passed on November 3, 2020, in the state of California and is a constitutional amendment that went into effect on February 16, 2021.
Prop 19 affects property tax assessment, particularly when residents are moving to a new home or leaving property to their children for inheritance. The proposition allows for more flexibility for those transferring their own properties but has put limitations on those who are inheriting property from their parents.
Who Does Prop 19 Affect?
Prop 19 affects homeowners who meet one of the following criteria:
- over the age of 55
- severe disabilities
- children inheriting property from their parents
- victims of a natural disaster
People over 55 or With Severe Disabilities
California residents pay property taxes based on the purchase price of their homes. The state allows people over the age of 55 or those with a severe disability to transfer their property taxes when purchasing a new home. Under the previous law, they were only allowed to do this in certain counties and could only do it once.
Prop 19 is much more flexible. Homeowners now have the option of purchasing a property that costs more than the current value of their home. They’ll use their previous property tax and pay an adjustment for the increased cost. They can now move anywhere in California and can transfer their property tax three times instead of once.
Children Inheriting Their Parents’ Homes
Prop 19 has put several restrictions on children inheriting their parents’ homes (or grandchildren inheriting grandparents’ homes). Now, tax assessment transfers are only allowed for primary residences. Inheritors will no longer be allowed to transfer tax assessments to rental properties, vacation homes, etc. These will be re-assessed and taxed based on the new value.
Inheritors will also be required to take on the home as their primary residence if they want the tax assessment to be transferred. They can’t use it as a vacation home or rent it out.
Previously there were no restrictions on property value when it came to tax assessment transfers. After Prop 19, there are now limits. The benefit can now only be up to $1,000,000 over the taxable value. Basically, if the market value is more than the taxable value plus $1,000,000, then the inheritor will have to pay extra depending on how much it goes over the limit.
Victims of a Natural Disaster
In the previous amendment, there was no provision for those who had suffered a natural disaster. Prop 19 states that those who lose their homes in a governor-declared natural disaster can transfer their previous tax assessment to their new home.
This provision applies to both pre-owned homes and new construction. Residents can apply it as many times as needed due to natural disasters.
California’s Prop 19 is bringing about a lot of changes. However, the law is new and there are many questions surrounding how it will work in every situation. For example, what will happen when parents want to leave a home to multiple children? The next few years should lead to some refinement and a better understanding of the new law.
If you have questions about Prop 19 and how it may affect you please call us at 916-299-6800 or fill out the form below.
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