California's Proposition 19, which took effect in 2021, brought significant changes to the state's long-standing property tax rules, building upon the foundation of Proposition 13. Here's a breakdown of the key aspects of this important legislation:

Expanding Property Tax Transfer for Specific Homeowners (Effective April 1, 2021):

Prop 19 significantly expands the ability for certain homeowners to transfer their existing property tax assessments to a new primary residence anywhere in California. This benefit applies to:

• Homeowners aged 55 or older: This aims to encourage seniors to move and downsize or relocate without facing a substantial property tax increase.
• Individuals with severe disabilities: Providing greater flexibility for those needing to move to accommodate their needs.
• Victims of wildfires and natural disasters: Allowing those who have lost their homes to rebuild or relocate within the state without a property tax penalty.

Key Provisions for Tax Transfer:

• Statewide Transfer: Eligible homeowners can now transfer their tax basis to a primary residence in any county within California.
• Value Matching:
  • For a replacement primary residence of equal or lesser value, there is no property tax increase.
  • For a more expensive primary residence, an upward adjustment to the tax basis will occur based on the difference in value. This transfer must be completed within two years of the sale of the original primary residence.
• Increased Transfer Limit: Eligible homeowners can now transfer their tax assessment up to three times throughout their lifetime.

Changes to Inherited Property Tax Rules (Effective February 16, 2021):

Prop 19 brought about a significant shift in how inherited properties are treated for tax purposes. The previous rules, often allowing children or grandchildren to inherit property at the same low tax basis as their parents or grandparents, have been largely eliminated for properties not used as the heir's primary residence.

• Reassessment for Non-Primary Residences: Inherited homes that will be used as second homes, rental properties, or any purpose other than the heir's principal residence will be reassessed at their current market value upon transfer. This can lead to a substantial increase in property taxes.
• Limited Exclusion for Primary Residences: While an exclusion still exists when the inherited property becomes the heir's primary residence, it's subject to limitations. If the market value of the inherited property exceeds the parent's taxable value by more than $1 million, an upward adjustment to the assessed value will occur.

Allocation of Revenue:

A portion of the additional revenue or net savings generated by Prop 19 will be allocated to wildfire agencies and counties within California.

Important Note for Seniors:

For eligible seniors aged 55 and older considering a move, OCT (Old Republic Title) offers a valuable benefit: a 15% discount on title policy fees. Contact your OCT Representative today to learn more about qualifying for this discount!

Building on Proposition 13:

It's crucial to remember that Prop 19 builds upon the framework of Proposition 13, passed in 1978. Prop 13 limited property taxes to 1% of a home's value based on its purchase year and capped annual increases in taxable value at 2%, regardless of market fluctuations. Prop 19 introduces targeted modifications to these long-standing rules.

Disclaimer:

Please remember that this blog provides a general overview of Proposition 19 and is not a comprehensive explanation. This information is for reference purposes only and does not constitute legal or tax advice. For detailed information specific to your situation, please consult your respective county website or seek advice from a qualified legal or tax professional regarding the potential effects of Prop 19 on your property tax assessments.