Prop 19 in California: What You Need to Know

Prop 19 allows eligible homeowners in California to transfer the taxable value of their primary residence to a replacement residence of equal or lesser value, regardless of the location or value of the replacement residence. This means that homeowners can keep their current property tax rate when they move to a new home, which could result in significant tax savings.

What is Prop 19?

In addition, Prop 19 also made changes to the state’s inheritance rules. Under the new law, inherited properties that are not used as the principal residence of the inheritor will be reassessed at market value when transferred, which could result in higher property taxes. However, inherited properties that are used as the principal residence of the inheritor can be transferred with the taxable value of the property, subject to certain conditions.

Background on Prop 19

Proposition 19 is a constitutional amendment that allows eligible homeowners to transfer their property tax assessments to a new home anywhere in California. The previous law, Proposition 13, allowed homeowners who were over 55 or who had severe disabilities to transfer their property tax assessments to a new home of equal or lesser value within the same county or to certain counties that have agreed to accept transfers. However, this limited transfer option has made it difficult for some homeowners to downsize or move to a new location.

Changes to Property Tax Law

Under Prop 19, eligible homeowners can now transfer their property tax assessments to a new home of any value anywhere in California, up to three times. This means that homeowners who are over 55, disabled, or victims of natural disasters can now sell their existing home and purchase a new one of greater value without experiencing a significant increase in property taxes. However, the new home must be purchased within two years of the sale of the previous home, and the property tax savings may be reduced if the new home is of greater value than the previous one.

Who is Eligible for Prop 19?

To be eligible for Prop 19, you must meet the following criteria:

  • You must be 55 years of age or older, severely disabled, or a victim of a natural disaster.
  • You must own a primary residence that has been your principal residence for at least the previous two years.
  • You must purchase or construct a replacement residence within two years of the sale of your original home.
  • The market value of the replacement residence cannot exceed the market value of your original home.

What are the Benefits of Prop 19?

The primary benefit of Prop 19 is that eligible homeowners can transfer the taxable value of their primary residence to a replacement residence of equal or lesser value, regardless of the location or value of the replacement residence. This means that homeowners can keep their current property tax rate when they move to a new home, which could result in significant tax savings.

In addition, Prop 19 also provides relief for victims of natural disasters, who can now transfer the taxable value of their primary residence to a replacement residence of any value anywhere in the state. This means that homeowners who lose their homes due to wildfires, earthquakes, or other natural disasters can rebuild and keep their current property tax rate.

What are the Drawbacks of Prop 19?

While Prop 19 provides significant benefits for eligible homeowners, it also made changes to the state’s inheritance rules, which could result in higher property taxes for some individuals. Under the new law, inherited properties that are not used as the principal residence of the inheritor will be reassessed at market value when transferred, which could result in higher property taxes.

Inheritance Rules

Prop 19 also made changes to the rules surrounding property tax assessments for inherited properties. Previously, inherited properties were subject to the same property tax assessment as the previous owner, even if the new owner did not use the property as their primary residence. Under Prop 19, inherited properties that are not used as a primary residence will be reassessed at market value at the time of transfer, which may result in higher property taxes.

However, Prop 19 does include a provision that allows eligible homeowners to transfer their property tax assessments to a new home inherited from their parents or grandparents if the new home becomes their primary residence. This means that if you inherit a property from your parents or grandparents and decide to make it your primary residence, you may be able to keep the previous property tax assessment.

In addition, the new law may make it more difficult for some individuals to inherit property from their parents or grandparents. Under the old law, inherited properties could be transferred with the taxable value of the property, regardless of the value of the property or the relationship of the inheritor to the original owner. Under the new law, inherited properties that are not used as the principal residence of the inheritor will be reassessed at market value when transferred, which could make it more difficult for some individuals to keep family properties.

Effective Date

Prop 19 went into effect on February 16, 2021, and its provisions will be phased in over the next few years. The new property tax assessment rules for inherited properties will take effect on April 1, 2021, while the new transfer rules for eligible homeowners will take effect on April 1, 2021, for those who sell their existing homes before February 16, 2021, and on April 1, 2023, for those who sell their existing homes after February 16, 2021.

In conclusion, Prop 19 is a significant change to California’s property tax and inheritance rules. While it provides significant benefits for eligible homeowners, it also makes changes to the state’s inheritance rules, which could result in higher property taxes for some individuals. If you are considering buying or selling a home in California, it’s essential to understand the implications of Prop 19 and how it may affect your property taxes and inheritance rights.

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