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                                    PROPERTY TAXES & PROP 19 (Effective 02/16/2021)

Proposition 13 was a proposition that helped California homeowners maintain their property tax basis with limited increases.  Proposition 60 was another proposition allowing homeowners to transfer their assessed value, if

• the home owner was over 55,
• their new home and the one they were selling was their primary residence,
• the new home was of equal or lesser value than their old home,
• and they could only do this transfer once in their lives.

Proposition 90 had all the same rules, but it only applied to certain counties. Therefore, counties within California could choose to opt in or out.

THE GOOD NEWS:

Proposition 60 and 90 became inapplicable and Proposition 19 became the new law of the land, automatically including all counties within California. So a homeowner can now move anywhere within California and apply the tax transfer from Proposition 19. Furthermore, homeowners now get three transfers within their life instead of one. In the past, married couples only got one transfer between them, even after a divorce. This new proposition is helping to correct that.

Proposition 19 also allows homeowners to purchase a new home up to a million dollars over the selling price of their old home and still get to transfer their property tax amount. However, they only get to transfer the property taxes up to the amount the home sold for. Anything above that selling price gets taxed at the present day amount.

The new rules for Proposition 19 have always applied to severely disabled people. However, the new proposition will extend to people affected by natural disasters (i.e. CA wildfire victims). These homeowners will not have to match the same criteria as everyone else when transferring property taxes. This is a great benefit for people who have second homes. If the second home is destroyed by a wildfire, they are now able to buy a new one and transfer the taxes.

THE BAD NEWS:

Proposition 58 allowed parents (and when warranted, grandparents to grandchildren) to gift their home of ANY value plus up to $1 million in other real property to their children. Furthermore, the property was exempt from reassessment at death and the children could maintain that lower basis for property taxes, ultimately keeping the property tax at the parents’ rate which was more often than not, much less than what it would be if the property were reassessed. This is no longer the case.  Under the old Proposition 58 the child could use the property any way they wanted, to live in, or as rental property.  No More.  Now, ONLY the residence can be exempted from reassessment for property taxes (and this amount is now capped - the parents’ basis + $1 million additional).  [Note: A Parent Child Exemption form must still be submitted to the County Assessor for approval.]  AND the gifted residence must be the children’s primary residence.  All other inherited real property will be reassessed to the date of death value and property taxes increased.  So if the parents had a rental property or a commercial building, property will be reassessed and property taxes raised accordingly.