Understanding California's Prop 19: What You Need to Know

California’s Proposition 19, which passed in November 2020, brought significant changes to the state's property tax system. This initiative has far-reaching implications for homeowners, particularly those looking to transfer their property or inherit a family home. Whether you're a senior, a wildfire victim, or someone considering passing your property to your children, it's essential to understand how Prop 19 might affect you.

Key Highlights of Prop 19:

1. Property Tax Transfers for Homeowners: 
  Prop 19 allows eligible homeowners to transfer their current property tax base to a new home anywhere in California. Eligible homeowners include those who meet one of the following criteria:

• Age 55 or older
• Severely disabled
• Victims of wildfires or other natural disasters

Specific qualifications for homeowners aged 55 or older:

• The replacement home must be purchased or newly constructed within two years of the sale of the original property.
• The original property must have been eligible for the homeowners’ or disabled veterans’ exemption.
• The replacement property must be of equal or lesser value if purchased or newly constructed before the sale of the original property, or up to 105% of the original property’s value if purchased or newly constructed within the first year after the sale, or up to 110% if purchased or newly constructed within the second year after the sale.
• The tax base can be transferred up to three times.

2. Changes to Inherited Property Tax Rules:
   Previously, children could inherit their parents' or grandparents' property and retain the original property tax base. Under Prop 19, however, this benefit is limited to properties that will continue to be used as the family home. If the inherited property is not used as a primary residence, it will be reassessed at market value, potentially leading to higher property taxes.

3. Revenue Allocation:
   The revenue generated from the reassessment of inherited properties is allocated to local governments, fire protection services, and schools. This shift aims to provide additional funding for essential services while balancing the tax relief offered to eligible homeowners.

Important Considerations:

- Eligibility for Base Year Value Transfers: Homeowners must meet specific criteria, including age, disability status, or having lost a home in a natural disaster, to qualify for the base year value transfer. This allows them to carry over their current property tax base to a new home of equal or lesser value. If the new home is of greater value, an adjusted tax base is applied.

- Impact on Heirs: Families considering passing on property should be aware of the new reassessment rules. If heirs do not plan to live in the inherited home as their primary residence, they should be prepared for the potential increase in property taxes due to reassessment at market value.

- Planning Ahead: It's crucial to understand these changes when planning for the future, whether you're thinking about moving or considering the implications for your heirs.

Have questions about Prop 19?

Reach out, and I’ll be happy to answer all of your questions.

Nicollette