California voters passed Proposition 19 in November 2020. This act — known as “The Home Protection for Seniors, Severely Disabled, Families, and Victims of Wildfire or Natural Disasters Act” — seeks to bring protections for homeowners and property tax reforms.
This proposition has far-reaching implications for California citizens, so it is important to understand how it may affect you. Here are five protections with Prop 19 that you should know about.
1. Parent-child and Grandparent-grandchild Transfer Exclusions Remain
You can still enjoy the parent-child and grandparent-grandchild exclusion under Proposition 19. However, the child or grandchild must use the residence in question as their primary one. Moreover, the exclusion now has a cap of $1 million in assessed value.
Should multiple children or grandchildren be involved in the exclusion, at least one has to reside in the home as their primary residence. Then, they can apply for the homeowners’ or disabled veterans’ exemption within a year of transfer.
In cases where transferees are heirs who move into the residence, they can only receive the exclusion if they continually make it their primary residence. Thus, moving out would give the property a new taxable value.
2. You Can Transfer the Assessed Value to a Replacement Residence
Under California Prop 19, you can transfer your existing assessed value to another primary residence up to three times if you are a homeowner who meets any of the following conditions:
- You are over 55 years old.
- You are severely disabled.
- You are a victim of a natural disaster.
3. Your Assessed Value Increases Per Year
Your assessed value can increase by up to 2% annually. Moreover, you can also utilize your assessed value to purchase a California residence that’s more expensive than your property’s original purchase price.
You will face a pro-rata increase if you decide to buy a more expensive residence. This increase will depend on the difference between the fair market values of your existing residence and the new one you intend to buy.
4. Property Taxes for Homes of All Types Go Up
Prop 19 changed the original property tax basis when you transfer property to your children and they don’t plan to use it as their primary residence. Under the new provision, taxes undergo reassessments based on the market value. Many taxpayer advocates have been vocal about this change because it affects all families in all kinds of homes.
Essentially, there is a level playing field where everyone’s properties undergo tax reassessment. However, it disregards class and specific situations, putting many families at a disadvantage because of their inability to pay higher taxes.
5. You Can Enjoy Eased Tax Burdens
If you are a homeowner who meets the Act’s intended beneficiaries, you can keep the tax benefits that you currently enjoy if you move to another home in any California county. If the home is more expensive than the one you sell, the additional tax amount will be pro-rated. You can take advantage of this break three times.
The Bottom Line
People who are buying or selling a home in California will need to consider the changes under Proposition 19. It is important to understand how the proposition may impact you, so you can make the most of its protections. Moreover, if you are a homeowner, you can take advantage of the eased tax burdens to make your move easier, if you fit the description of who the proposition protects.
