Proposition (Prop) 19, is a new law that could impact homeowners and prospective homebuyers in California. Whether you’re a homeowner, or a prospective buyer, here is what you need to know.
Property Tax Portability:
Prop 19: Allows individuals 55 or over or who are severely disabled to transfer their tax basis up to three times, anywhere in the state, and to a property of any value.
Inheritance Property Tax Benefit:
Certain property tax reassessment exemptions in Proposition 58/193 expire and are replaced by Proposition 19 beginning February 16 2021. For inherited properties, this limits the inheritance property tax benefits to the transfer of a residence that will be used as the primary residence by the transferee.
In situations where the current market value exceeds the previous taxable value by more than $1 million, the new assessed value will be calculated by subtracting $1 million from the current market value. This $1 million amount will be adjusted for inflation beginning 2023.
Prop 19 What you need to know Q and A
Q: Prop 19 offers certain California residents tax portability benefits. Which groups will be able to benefit?
A: Residents who are over 55, qualify as severely disabled, or whose homes have been seriously damaged by a natural disaster or wildfire.
Q: If the transferee does not elect to use an inherited property as their primary residence, can the property be exempt from tax reassessment?
A: Under Prop 19, the tax benefits only apply to inherited properties claimed as the principal residence of the transferee.
Q: Are all intergenerational transfers of a primary residence exempt from a tax reassessment under Prop 19?
A: No, not all of them. For example, if the difference between the transferred property’s actual value and taxable value exceeds $1 million, the new taxable value will be adjusted upward.
Q: I’m trying to determine how Prop 19 should impact my decision on whether and when to transfer my properties to my children. Who should I contact for advice?
A: You may want to contact a legal and/or tax professional to better understand how the various provisions of Prop 19 could impact your decision to buy, sell, transfer or hold onto your property.
Visit California State Board of Equalization‘s website for more info.
The information is not intended to be a substitute for professional guidance. Individuals are encouraged to seek professional tax and/or legal services to determine courses of action in response to Prop 19’s passing.