Made Effective April 1, 2021, allows homeowners 55 or older, those with severe disabilities, and victims of wildfires and natural
disasters to transfer their tax assessments anywhere within the state of California to a primary residence of equal value with no
property tax increase, or a more expensive primary residence with an upward adjustment within two years of the sale of the original
Eligible homeowners can transfer their tax assessments up to three times.
Made Effective February 16, 2021, requires that inherited homes that are not used as principal residences, such as second homes
or rentals, be reassessed at market value when transferred to children or grandchildren.
Allocates additional revenue or net savings resulting from the ballot measure to wildfire agencies and counties.
Proposition19 builds off of Proposition 13, passed in 1978, which limited property taxes to 1% of a home’s value, based on the year
the house was purchased. Proposition 13 also restricted the amount that taxable value can go up every year to 2%, even if a home’s market value increased much more.
Proposition 19 allows homeowners who are 55 or older to transfer the taxable value of their old house to a new home of equal value or a
more expensive home, thereby avoiding the big jump in property taxes they would otherwise face. This is designed to encourage seniors
to enter the real estate market.
Proposition 19 also changes tax reassessments on inherited properties and makes it no longer possible for inherited homes to maintain
the same low property tax rate enjoyed prior to the inheritance if the heir does not move into it as a primary residence. Children who inherit their parent’s home, but only intend to keep it as a second home or rent it out, would see a big increase in property taxes under
Proposition 19. Further, when the inherited property is used as the recipient’s principal residence, but has a market value of $1 million
more than the property’s taxable value, an upward adjustment in assessed value would occur.
Let me give you couple of examples:
BIG TAX SAVINGS FOR HOMEOWNERS MOVING WITH A PROP 19 TAX BASE TRANSFER
A 55-year-old couple purchased their home 30 years ago for $110,000. The taxable value of their home is now $200,000 (the $110,000 tax base value increased 2% each year for 30 years). Their annual property tax bill is $2,200 (1.1% multiplied by the taxable base). Under Prop 19, the couple can sell their home for $600,000 and transfer the property tax base of their original home to a replacement home anywhere in California, up to three times.
Example #1: Buying an Equal or Less Expensive Home:
If the couple sells their home for $600,000 and buys a replacement home for the same amount or less, the couple could transfer the lower tax base of their original home to the replacement home and save $4,400 on their annual property tax bill. By transferring the original home’s tax base ($200,000) to their replacement home, the couple would pay the same amount in property taxes ($2,200) after moving – instead of paying $6,600 on the replacement home’s purchase price of $600,000.
- Example #2 Buying a More Expensive Home:
If the couple sells their home for $600,000 and buys a more expensive home for $700,000, they could transfer the property tax base of their original home to the replacement home and save $4,400 on their annual property tax bill. Instead of paying $7,700 in taxes on the $700,000 purchase price of the replacement home, the couple would pay $3,300 because the new tax bill would be calculated by adding the original home’s tax base ($200,000) to the difference between the purchase price of the replacement home ($700,000) and the sales price of the original home ($600,000).
For more information on Proposition 19 and to discuss your personal situation, please reach out to me at 408-835-4317.