What Will California Prop 19 Mean for Homeowners and their Transfer Tax?
In 2020, Proposition 19 passed in California. It was one of two on the ballet that affected property tax rules. Now that it has been signed and approved, it is time for the public to be sure they know what it means – and what it doesn’t mean. As an escrow company, we stay up on this and all other property resources that affect our job.
What Prop 19 Means
Now that Prop 19 has passed, an eligible homeowner can transfer their tax assessment to anywhere within the state of California to allow tax assessments to be transferred to a more expensive home with an upward adjustment.
It also holds that the number of times a person over the age of 55 years old with severe disabilities can transfer their tax assessments has been increased from one to three. An inherited home that is not used as a primary residence (like a second home or property that is rented) must be reassessed at market value when it is transferred, and the Prop also allocated more revenue or net savings from this ballot measure to wildlife agencies and individual counties.
The New Rule Has Taken Effect
The rules took effect on transfers that occurred after February 15, 2021, as for the inheritance exclusion, while they will take effect on April 1, 2021, for ages 55 and up, the intra county disaster relief, and the inter-county disaster relief. Owners of low-assessed value legacy properties took steps to prevent Prop 19 from having a large effect on their properties.
Another Change Under Prop 19
The new property tax exemptions that are taking place under Prop 19 also include changes to the Parent-to-Child exemptions. For example, it limits the kinds of transfers between parents and children that can be exempted from reassessment. It also changes the property tax benefit that is overall available.
After it takes effect, only a transfer of the parent’s primary residence to the child will qualify. If the transfer does meet that requirement, then the child’s assessed value for the property would be based on the actual assessed value when the transfer takes place.
For example, if the property value is higher than the parent’s assessed value by less than one million dollars, then the child can take their parents’ assessed value, but if the difference is more than one million dollars, then the child’s assessed value is the current property value minus one million dollars.
Does this sound confusing? The good news is that there will be many tax and real estate professionals who can answer the questions you have about this and other changes to tax and property tax law.