Effective April 1, 2021, Proposition 19 provisions potentially affect the former base year value transfers for persons age 55 and over that were added by Propositions 60 (1986) and 90 (1988).
California Proposition 19, also known as the “Property Tax Transfers, Exemptions, and Revenue for Wildfire Agencies and Counties Amendment,” was a ballot measure that was passed in November 2020. Proposition 19 made several changes to property tax rules in California.
Under Prop 19’s base year value transfer provision, if the transfer of taxable value is to a replacement primary residence that has a full cash value that is of equal or lesser value than the full cash value of the original primary residence, the taxable value of the replacement primary residence is deemed to be the taxable value of the original primary residence. However, if the transfer of taxable value is to a replacement primary residence that has a full cash value that is of greater value than the full cash value of the original primary residence, then the taxable value of the replacement primary residence is deemed to be the taxable value of the original primary residence plus the difference between the full cash value of the original primary residence and the full cash value of the replacement primary residence
Parent-Child/ Grandparents and Grandchildren Property Tax Exclusion:
Allows transfers of a family home between parents and their children without causing a change in ownership for property tax purposes so as to allow the transferee to retain the taxable (base year) value of the transferor.
Previously under Proposition 58, parents could transfer their primary residence and up to $1 million in assessed value of other real property to their children without reassessment for property tax purposes. Under Prop 19, this exemption is limited it to transfers of a primary residence only. In other words, the exemption is available if the child uses the property as their primary residence, and it includes a reassessment of the property to market value for any other inherited property.
Obtaining the exemption requires the submittal of a claim for Reassessment to the County Assessor where the property is located. Application must be filed within three years of the date of the transfer date, but before transferring the property to a third party. Additionally, before a claim is filed, the transferee must file for the homeowners’ or disabled veterans’ exemption within one year of the transfer date.
The same conditions and requirements as the exclusion for transfers between parents and children apply between Grandparents and Grandchildren, except in order to qualify, the parents of the grandchild, who qualify as children of the grandparents, must be deceased.
Seniors and Disabled Individuals:
Homeowners who are 55 years of age or older, severely disabled, or victims of wildfire or natural disasters to transfer their property tax base to a replacement property anywhere in California. The transfer can be made up to three times, and it applies to any value of the replacement property, even if the replacement property has a higher value than the original property, although there may be some adjustments to the tax base.
No adjustment to transferred base year value if the replacement property is of equal or lesser value than the original property’s market value. “Equal or lesser value” means:
- 100% if replacement purchased/newly constructed prior to sale
- 105% if replacement purchased/newly constructed in first year after sale
- 110% if replacement purchased/newly constructed in second year after sale
Amount above “equal or lesser value” is added to transferred value
The following are requirements to qualify:
- Replacement residence must be purchased or newly constructed within two years of the sale of the original property.
- Claimant must be at least age 55 years or older at the time the original property is sold.
- Both the original and replacement properties must be eligible for the homeowners’ or disabled veterans’ exemption. The claimant must own and reside in the original property at the time of its sale or within two years of the purchase or new construction of the replacement.
- Either one or both the sale of the original property or the purchase/completion of new construction of the replacement must occur on or after April 1, 2021.
- The original property must be sold, and the replacement purchased for consideration. Consideration is defined as something of value such as payment of cash, creation or cancellation of debt, or exchange of other property.
Inherited and Non-Primary Residence Properties:
Previously, when a property was transferred to children or grandchildren, it would generally be assessed at the current market value, often resulting in increased property taxes. Under Proposition 19, the property tax assessment for inherited homes is now based on the current market value, but with certain limitations and exclusions. So if a property is inherited and not used as the primary residence, it will be reassessed to market value, potentially resulting in higher property taxes.
Prior Proposition 58:
This allowed parents to transfer their primary residence, as well as up to $1 million in assessed value of other property (such as a vacation home or investment property), to their children without a reassessment of property taxes. This transfer can occur during the parent’s lifetime or upon their death. Proposition 58 also permitted the transfer of a primary residence from a grandparent to a grandchild without a reassessment, subject to certain conditions.
Prior Proposition 60:
This measure allowed homeowners aged 55 or older to transfer their base year value to a replacement residence if certain conditions are met. The replacement property must be located in the same county as the original property, and it must be of equal or lesser value than the original property. The transfer of the base year value is a one-time opportunity, and it could only be used within two years of the sale of the original property.
Prior Proposition 90:
This measure extended the provisions of Proposition 60 by allowing homeowners aged 55 or older to transfer their base year value to a replacement residence in a different county within California.
Please see our other related articles
Holding Title to Property
Homestead Exemption
Wills and Trust
Probate
Disclaimer: Every situation is different and particular facts may vary thereby changing or altering a possible course of action or conclusion. The information contained herein is intended to be general in nature as laws vary between federal, state, counties, and municipalities and therefore may not apply to any given matter. This information is not intended to be legal advice or relied upon as a legal opinion, course of action, accounting, tax, or other professional services. You should consult the proper legal or professional advisor knowledgeable in the area that pertains to your particular situation.
