Category Archives: California Proposition 13

How Has California Proposition 13 Evolved Over the Years?

Posted on by
1

Before 1978, rising California property taxes were escalating out of control. Since 1978, Proposition 13 dramatically lessened the accelerating anxiety that was negatively affecting middle class California home owners, who were, at that time, constantly worrying that their property taxes were going to continue going up.  Now, children keep parents property taxes in CA… and anxiety over property taxes has abated considerably. Prop 13 has evolved over the years, and has continued to provide positive tax relief for California home owners; industrial properties, and companies…

Click Here: to see how this is reflected in a recent PPIC.org survey (co-managed by Associate Survey Director) mirroring likely voters and/or real property owners in California.

To everyone’s relief, things changed when California Proposition 13 began protecting property owners and city or town local governments right away from financial insecurity largely caused by unpredictable property tax increases; as well as unexpected economic boom-bubbles and bursting bubbles within the real estate market.

That type of unpredictable financial stress hurt a lot of people in California; and often forced families to leave the beloved home they had grown up in… Unpredictable, rising property taxes caused a great deal of growing anxiety and fear among many middle class home owners, both young and old – often causing parents and grown children to reside far apart, against their wishes; frequently forcing families to downsize, or move to less desirable area; often doubling or even tripling the commute time to work. These issues do add up, and frequently affect quality of life.

From 1978 forward… as Proposition 13 took hold, this fear and disruption abated and decreased to a large degree… and California became a much happier, more secure state for home owners to live and raise families in.

Proposition 13 also put in place a much more reliable property tax revenue system that has grown roughly 7% per year since Proposition 13 has been in effect, and economists estimate revenue from property taxes will soon grow to a record high $74 billion.

All in all, Proposition 13 began and has remained a win-win proposition for Californians, along with Proposition 58 in 1986… strengthening family bonding and overall net worth, and providing an enormous blanket of peace of mind for home owners of all stripes, cultures, ages and incomes…. as well as those looking to become happy home owners.  Click here for more discussion on these positive affects, from both Proposition 58 and Prop 13.

Moreover, the ability to avoid property tax reassessment also works in concert with the need many home owners have for immediate funds from a trust loan, bearing in mind the ability for trust lenders to extend loans to irrevocable trusts, regardless of beneficiaries’ income status,  credit score or income.  Especially for new home owners, it’s critical to be able to keep parents’ property taxes, when inheriting property taxes that might otherwise be unmanageable.

Avoiding property tax reassessment is invaluable within the unique process of keeping real property “in the family”, by enabling real estate, home & land transfers, from parent to child  or child to parent – without present day tax value reassessment.

And now, although children keep parents property taxes in CA. and this tax relief goes unquestioned by home owners, California Proposition 193 has expanded this tax relief even further, allowing grandchildren to be excluded from reassessment when real property is transferred from grandparents to grandchildren. This shores up the close-family circle nicely.

California Proposition 13

Posted on by
2

California Proposition 13

California Proposition 13 is also known as “The People’s Initiative to Limit Property Taxation”.  Prop 13 is an amendment to the Constitution of California that became law in 1978. When voters in California passed Proposition 13, the maximum amount of tax on real estate no longer could exceed 1% of the total cash value of your home, or additional real property you owned.  Moreover, Prop 13 limited yearly increases of assessed value of real estate to an inflation factor not to exceed 2% per year.

Another component of Proposition 13 transfer of property is that it prohibits reassessment of new base year value, except when there is a change in ownership of real property, or new construction. This permits homeowners in California to refinance a mortgage without being concerned that their home, or real  property, will be reassessed for market value. This is often of particular concern to elderly homeowners, who frequently reside in the same home for decades; and therefore have many opportunities to re-mortgage, with a long-term payment schedule in place.

In 1986 California voters passed Proposition 58, which, in a sense, works in concert with the limits that Proposition 13 places on your home’s tax base.  In other words, Proposition 58 excludes transfers of real property, between parents and children, from current market value tax reassessment. Prop 58 allows property to be transferred from parent to child, or vice versa, with the use of a Trust.  For example, this enables an adult child to inherit a home from a parent, and keep the parents’ low Proposition 13 tax base. The ability to do this  frequently saves beneficiaries receiving property from parents literally thousands of dollars per year, and in many cases tens of thousands of dollars, in property taxes.

There are some restrictions when it comes to proposition 58.  Properties held in a Trust must meet certain requirements in order to qualify.  For instance, one  requirement states that no funds from an acquiring beneficiary can be placed in the Trust.  In that particular circumstance, a loan is often received from a third party, and placed in the Trust. You can learn more about third party loans for California Proposition 58 qualification here.

There have been some discussions in the media, and among the political class, in California, about repealing both Proposition 13 and Proposition 58.  However, as you can imagine, both Propositions have a great deal of support among California homeowners.

In fact, 42 years after California Proposition 13 went into law, it still enjoys popular support among most California homeowners.  It’s interesting to note that a survey by the Public Policy Institute of California revealed that 57% of  adults polled support the measure.  However,  58% would prefer to allow  homeowners keep Prop. 13’s tax relief and property protections (particularly for seniors) while imposing higher property taxes on business owners.  33% of those polled oppose that sort of taxation on business owners in California.

What do you think? Let us know… We’ll be publishing the results of this survey, so your participation is valuable, and greatly appreciated!  (Your name and contact info will of course remain confidential and private, and will never be shared with any third party entities)…