Demystifying California's Property Tax Changes for Homeowners

Thinking about downsizing or relocating within California? In California, homeowners aged 55 or older have an opportunity to transfer their existing property taxes to a new primary residence, thanks to Proposition 19, also known as Prop. 19. But with any major change, understanding the ins and outs is crucial. This blog post will unpack Prop 19, its significance, how it impacts you, and where to find more information.

What is Proposition 19?

Proposition 19 was passed in November 2020 and became effective on February 16, 2021, bringing three vital components into play:

Property Tax Transfers for Individuals 55 and Older:

Prop. 19 focuses exclusively on property taxes, distinct from income taxes or capital gains. If you're 55 or older, you can transfer your current low property taxes to a new home.

Changes in the Inheritance of Property:

Prop. 19 alters the way property taxes are handled when property is inherited within a family. This change went into effect on February 16, 2021.

The Creation of the California Fire Response Fund:

Prop. 19 establishes the California Fire Response Fund, intended to support local fire staffing and emergency response, including CalFire.

Who Qualifies for Prop 19 Benefits?

To qualify for the Prop 19 property tax benefits, you must be over 55 years old age, disabled, or be a victim of a natural disaster. Parents or grandparents can pass along their primary residence and its property tax basis to their children or grandchildren. Yet, beware that there are restrictions under Prop 19.

What Situations Does Prop 19 help?

This new law offers more flexibility for several homeowner situations:

Thinking of Downsizing? Prop 19 can make that cozy condo you've been eyeing a more realistic option. You can take your lower tax base with you, even if the condo is less expensive than your current home.
Moving Across the State? Family ties pulling you south? Prop 19 lets you keep your cherished tax benefit as you relocate to be closer to loved ones, anywhere in California.
Disaster Relief: If your primary residence suffers major damage from a disaster, Prop 19 allows you to transfer your tax base to a replacement property.
Gift real estate: By gifting your children or grandchildren with property, your loved ones will benefit from lower property taxes if they use the home as a primary residence within one year of the transfer, and there are other benefits, too!

Are there any downsides to Prop 19?

While Prop 19 offers advantages, it's important to consider potential drawbacks: Rising Property Values. While Prop 19 provides for some tax relief, it is capped at $1,000,000. So if the home value is assessed at greater than that, yo will pay more in taxes but only on the additional portion. Additionally, if you transfer your tax base to a location with significantly higher property values, you may see a future increase in property taxes. Last, Prop 19 also eliminates all currently available Prop. 13 and Prop. 58 benefits on the transfer of non-primary residences (with some exception for agricultural property) to children.

Where to learn more?

Prop 19 offers exciting possibilities for many California homeowners. To make informed decisions, consider these resources:

Your Local County Assessor's Office: A wealth of information is often available online.
California State Board of Equalization: They offer a comprehensive resource on property taxes.

Ready to explore how Prop 19 could impact your next move? Our experienced real estate team is here to answer your questions and guide you through the process. Contact us today for a personalized consultation.