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Proposition 19: Understanding California’s Property Tax Changes for Homeowners

Proposition 19: Understanding California’s Property Tax Changes for Homeowners

Mar 28, 2024

Thinking about downsizing or relocating within California? Proposition 19, passed in November 2020 but only recently going into effect, might be a game-changer for your property taxes. But with any major change, understanding the ins and outs is crucial. This blog post will unpack Prop 19, its history, how it impacts you, and where to find more information.

Prop 19: Balancing Fairness and Flexibility

California’s property tax system, fueled by Proposition 13, has been a double-edged sword. While offering tax relief to long-time homeowners, it could make moving or downsizing a financial burden. Prop 19 emerged from the desire for a fairer system, particularly for seniors, families, and those facing disaster.

Previously, Proposition 13 allowed homeowners to transfer their lower tax base (think of it as a property tax shield) only to a new primary residence of similar value within the same county. Prop. 19 loosens these restrictions, allowing you to transfer your tax base to a new home anywhere in California, regardless of its value.

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!

Is Prop 19 All Sunshine and Rainbows?

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:

Remember, consulting a tax professional is highly recommended for personalized advice regarding your specific situation and Prop. 19. By understanding Prop. 19, you can unlock its potential benefits and navigate California’s evolving property tax landscape with confidence. Happy house hunting!

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