In the most recent election, Proposition 19 was placed into law by a slim majority and will be in effect as of April 1, 2021. Prop 19 gives new property tax breaks to homeowners over 55 while increasing the for those who will inherit their family’s properties. The most important point is . . . heirs will now pay the market value in taxes.
Where it benefits older homeowners is when they sell their current home to downsize. It is reported that some tax benefits have been added for severly disabled residents and those whose property may have been ruined by natural disaster or catastrophe.
Supported by the National Association of Realtors (N.A.R.) and the California Association of Realtors (C.A.R.) and California Professional Firefighters, data on the site Yeson19.vote states Proposition 19 should add up to $2 billion annually to the California budget.
How does Proposition 19 affect you? While it benefits older homeowners and is a win for California’s coffers, those who inherit their family homes will find living in California increasingly unaffordable. These homeowners will be forced to sell as the cost to hold the home will be more than they can handle.
If you were affected by the wildfires, there are a few changes to be aware of. You now are covered for your purchase or newly constructed residence instead of within 5 years of disaster, but within 2 years of sale. More importantly, you can now relocate to another county, whereas before you could only use your benefits within your county of residence.
The outcome will be that the older homeowners will rush to sell their family homes and fewer will be inherited by their children. Those who inherit homes will sell to cover the taxes. The young who have inherited their homes in the past will end up living very different lives, many will leave the stated to find an affordable lifestyle.
Please feel free to contact Holly or me to discuss how this will affect your family and how we might help you create a safe sale or transation.
The following comes from the Board of Equalization website at
boe.ca.gov/prop19/
The Home Protection for Seniors, Severely Disabled, Families, and Victims of Wildfire or Natural Disasters Act
To assist taxpayers, below are comparison charts of current law and the effects of Proposition 19, pending its enactment. For further information on Proposition 19, please see Letter to Assessors No. 2020/061.
Please continue to visit the BOE website for updates, as additional legislation will provide further clarification. For assistance or questions regarding the information below, please contact the Property Tax Department at 1-916-274-3350.
PARENT-CHILD & GRANDPARENT-GRANDCHILD EXCLUSION
| Current Law | Proposition 19 | |
|---|---|---|
| Principal Residence | Principal residence of transferorNo value limitResidence and homesite (excess land may be excluded as “other property”) | Principal residence of transferor and transfereeValue limit of current taxable value plus $1,000,000 (as annually adjusted)Family homes and farms |
| Other Real Property | Transferor lifetime limit of $1,000,000 of factored base year value | Eliminates exclusion for other real property other than the principal residence |
| Grandparent-Grandchild Middle Generation Limit | Parent(s) of grandchild, who qualifies as child(ren) of grandparent, must be deceased on date of transfer | No change: parent(s) of grandchild, who qualifies as child(ren) of grandparent, must be deceased on date of transfer |
| Filing Period | File claim within 3 years or before transfer to third party | File for homeowners’ exemption within 1 year of transfer |
| Implementing Statute | Revenue & Taxation Code section 63.1 (implements Propositions 58/193) | To be determined |
| Important Dates | Through February 15, 2021 | Effective February 16, 2021 |
BASE YEAR VALUE TRANSFER – PERSONS AT LEAST AGE 55/DISABLED
| Current Law | Proposition 19 | |
|---|---|---|
| Type of Property | Principal residence | Principal residence |
| Timing | Purchase or newly construct residence within 2 years of sale | Purchase or newly construct residence within 2 years of sale |
| Location of Replacement Home | Same countyCounty with intercounty ordinance (10 counties) | Anywhere in California |
| Value Limit | Equal or lesser value100% if replacement purchased/new construction prior to sale105% if replacement purchased/new construction in first year after sale110% if replacement purchased/new construction in second year after sale | Any valueAmount above 100% is added to transferred value |
| How many transfers? | One timeException: After using once for age, second time for subsequent disability | Three times |
| Implementing Statute | Revenue & Taxation Code section 69.5 (implements Propositions 60/90/110) | To be determined |
| Important Dates | Through March 31, 2021 | Effective April 1, 2021 |
BASE VALUE TRANSFER – INTRACOUNTY DISASTER RELIEF
| Current Law | Proposition 19 | |
|---|---|---|
| Type of Property | Any type of property | Principal residence |
| Timing | Purchase or newly construct property within 5 years of disaster | Purchase or newly construct residence within 2 years of sale |
| Location of Replacement Property | Within same county | Anywhere in California |
| Value Limit | Any valueAmount above 120% is added to transferred value | Any valueAmount above 100% is added to transferred value |
| Type of Disaster | Disaster for which the Governor proclaims a state of emergency | Wildfire, as defined, or natural disaster as declared by the Governor |
| Implementing Statute | Revenue & Taxation Code section 69 (implements Proposition 50) | To be determined |
| Important Dates | Through March 31, 2021 | Effective April 1, 2021 |
BASE YEAR VALUE TRANSFER – INTERCOUNTY DISASTER RELIEF
| Current Law | Proposition 19 | |
|---|---|---|
| Type of Property | Principal residence | Principal residence |
| Timing | Purchase or newly construct principal residence within 3 years of disaster | Purchase or newly construct principal residence within 2 years of sale |
| Location of Replacement Home | County with intercounty ordinance (13 counties) | Anywhere in California |
| Value Limit | Equal or lesser value105% if purchased/new construction in first year after disaster110% if purchased/new construction in second year after disaster115% if purchased/new construction in third year after disaster | Any valueAmount above 100% is added to transferred value |
| Type of Disaster | Disaster for which the Governor proclaims a state of emergency | Wildfire, as defined, or natural disaster as declared by the Governor |
| Implementing Statute | Revenue & Taxation Code section 69.3 (implements Proposition 171) | To be determined |
| Important Dates | Through March 31, 2021 | Effective April 1, 2021 |
Note: The above charts are intended to provide general and summary information about Proposition 19. It is not intended to be a legal interpretation, official guidance, or relied upon for any reason but instead be a presentation of summary information. If there is a conflict between the information above and the text of the proposition or its implementation, the text of the proposition or legal interpretation will prevail. The above is intended as general information only.
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