Have you heard that, by a narrow majority, California voters approved the passage of Proposition 19 (Prop 19)? The measure stands to have a major impact on many California residents, as it will simultaneously give new property tax breaks to those who have suffered a loss of their home due to a natural disaster and older homeowners while increasing property taxes for those who inherit property from parents. The measure takes effect beginning February 16th.
Prop 19 provides new exemptions to older homeowners statewide. More specifically, it allows homeowners who are 55 or older, or have lost a home in a natural disaster, to transfer their tax assessment basis to another home three times. Previously, this was only permitted once and only up to the fair market value of the previous home. It was meant to ease the cost of moving for those on a fixed income and allow for a transfer of wealth to the next generation if they inherited the family home or up to $1 million in assessed value of other real property. In the past, counties were able to choose whether to participate in the program (Prop 60/90). With the new rule older homeowners stand to enjoy a substantial property tax benefit should they choose to purchase a new primary residence, even a more expensive home, anywhere in California.
The other major part of Prop 19 is the elimination of the parent-child exclusion which allowed transfers of real property to a child (or in some case a grandchild) with no reassessment in property tax. Under Prop 19, the tax value of the property will be reassessed if the child or grandchild does not live on the inherited property.
This means those inheriting property will not receive the tax break previously enjoyed should they intend to keep the inherited property or rent it out. Be mindful that, if you are in this type of situation, you only have until February 15, 2020, to take advantage of the transfer and preservation of Parent/Child Exclusion.
For more information on Prop 19 and how it may impact you, our office is happy to help answer your questions. Please reach out to us to schedule an appointment.
Additional Article on Prop 19 by DeEtte L. Loeffler: Click Here to Read