Here’s what Californians need to know about the recently passed Prop. 19.
Several significant changes have been brought about by Proposition 19, and a lot of people don’t have a firm understanding of them yet. Today I’m explaining the good, the bad, and the ugly of Prop. 19 so that everybody is up to speed and can move forward with the same expectations.
Let’s start with some of the great things about it. As of April 1, 2021, those who are over the age of 55 will be able to move anywhere in the state of California and take their property tax base with them. In the past, you’d only be allowed to do this once, and you could only move to certain counties. Now, you’ll be able to move up to three times and still carry your property tax base with you.
The best part is that you don’t necessarily have to move to a property that’s of lesser value than the one you own now; if you buy a more expensive property, your property tax base will be prorated above your current price. That’s great news for a lot of Californians, as it gives them much more flexibility in the market. In addition to individuals 55 years and up, people who are severely disabled and those who have been victims of wildfires can also qualify.
Here’s another big change: You can no longer inherit property that was not a primary residence and rent it out while keeping the previous owner’s tax base. The old tax laws stated that if you inherited a property from a parent, you could fill out the paperwork to get an exemption—either a parent-child or grandparent-grandchild exemption—allowing you to continue the same tax base that your family member enjoyed. So, if they were only paying $1,000 in annual property taxes back in 1972, then that’s the base you’d enjoy, too, regardless of whether or not it was a primary residence.
“You can no longer inherit property that was not a primary residence and rent it out while keeping the previous owner’s tax base.”
However, on February 15, 2021, the new rule regarding inheritance takes effect: The only way you’ll have the same tax base as your parents or grandparents is if you inherited their primary residence and it became your primary residence. If it becomes a rental property, or if your parents held it as a rental property, you’ll no longer qualify for that lower tax base; you would be reassessed at the new value, which, for a lot of people, is a pretty significant number.
There are some ways to start planning around these Prop. 19 changes, so I recommend talking to your tax advisor, financial planner, or estate planning attorney. One of the most obvious ways to avoid the new limitations for inheriting a property tax base is to simply transfer that property to your child before February 1, but of course, there are some ramifications with that as well.
Feel free to give me a call or send an email, and I’d be happy to explain it all in more detail as it pertains to your particular scenario. As always, I’m here to be a resource for your real estate needs. I hope you found today’s blog helpful; please share it with any friends or family who would be interested in this topic.
