California Prop 19 Rules for Transferring Property Taxes
Background and Updated Details on Proposition 19
Proposition 58 – a wildly popular, successful property tax relief measure since 1986, was a life-saver for middle class homeowners and beneficiaries inheriting property taxes from Mom & Dad; from San Jose all the way to San Francisco and beyond – and was abruptly replaced after a rushed, slightly confusing PR campaign; with a tax measure called “Proposition 19” – revising Prop 58’s flagship tax break, the “parent-child exclusion”.
Yet Prop 19, true to it’s advertising, added invaluable property tax exemptions for homeowners age 55 and over, for folks with severe disabilities, and victims of natural disasters and forest fires. Giving qualified homeowners the ability to transfer the assessed value of their primary home to a newly purchased or newly constructed replacement “primary residence” up to three times in a lifetime.
For heirs inheriting a home from parents, the bottom line objective for families is property tax transfer – a low property tax base of course; avoiding property tax reassessment; and naturally the right to transfer parents property taxes and keep parents property taxes, when inheriting a home and inheriting property taxes from Mom & Dad… Having access to a comfortable stress-free parent-child transfer, and a parent-to-child exclusion from having to pay extremely high current property tax rates. Although nothing is perfect, California’s property tax relief, as it is now, gives a foothold to consumer and homeowner advocates who firmly believe the folks in power should go all the way, to pause CA property taxes to combat Pandemic impact on the local economy.
Promotion of Proposition 19, albeit slightly misleading, said it all in the title – the “Home Protection for Seniors, Severely Disabled, Families and Victims of Wildfire or Natural Disasters Act” – more or less replacing the constitutional amendment Proposition 58… However – still maintaining the right to take advantage of a parent-child transfer, inheriting property taxes from Mom & Dad to keep a low property tax base with a parent-to-child exclusion – homeowners are still able to use Proposition 19 in conjunction with a loan to an irrevocable trust, to buyout inherited property shares from beneficiaries, giving inheritors plenty of time, up to 12-months, to move into an inherited primary residence.
Changes to Property Tax Relief Effective 2/16/2021 and 4/1/2021
• Replacing Proposition 58 (est. 1986) and Proposition 193 (est. 1996) – limiting parent-to-child transfers and grandparent-to-grandchild transfer exemptions (Proposition 193).
• Replacing Proposition 60 (est. 1986) and Proposition 90 (est. 1988) that allowed home transfer exemptions for seniors; and Proposition 110 (est. 1990) allowing exemptions for disabled homeowners.
To qualify for property tax relief, residents have to file a claim with their County Tax Assessor by the time stated in the local county ordinance, or inside 12-months from the date of property damage caused by a natural disaster, a flood, earthquake, whatever – whichever is later. The loss estimate has to be at least $10,000 of current or “fair market” value to qualify for this type of property tax relief. Property taxes are reassessed and adjusted according to the level of damage.
Requirements to Qualify for Proposition 19 Approval
1. Proposition 19 permits property tax decreases by allowing families inheriting real estate to avoid property tax reassessment on a family home used as a principle or primary residence.
2. Only one child (heir) after property is transferred, and both parents before property is transferred over, have to be primary residents of inherited property, with plenty of time (12-months) to move in after the transfer.
3. Proposition 19 allows the transfer of a family home or farm between parents and their offspring, or grandparents and grandkids (as long as both parents are deceased) without triggering “change in ownership” based property reassessment – which is a property tax increase everyone wants to avoid.
At least one beneficiary has to reside in a primary residence, upon the purchase or transfer of a family home between parents and their children, in order to qualify for a property tax exclusion.
It’s worth reiterating that in order to qualify, a beneficiary inheriting real estate must be eligible for the “homeowners’ exemption” or “disabled veterans’ exemption“, applied within 12-months of the transfer or purchase. A parent also has to be eligible for homeowners’ exemption or disabled veterans’ exemption within 12-months of transfer or purchase. Using a home as a primary residence. And can still apply even without one of these exemptions by simply proving the home is a primary residence. It is important to point out that there is no requirement for a family farm to contain a home that a beneficiary has to reside in.
The Tax Assessor’s Office has a calculator to help homeowners estimate their potential property tax savings from a tax exclusion.
To Qualify for an Exclusion the sccassessor.org Website States:
“The value limit is equal to the home’s taxable value at time of transfer plus $1 million. Any amount of market value exceeding the limit is added to the taxable value for the transferee. Partial relief is granted under the parent child exclusion up to the value limit; with the remainder assessed at market value.
A $1 million allowance will be adjusted annually beginning in 2023.The principal claimant or the claimant’s spouse who resides with the claimant must be at least 55 years of age at the time the original residence is sold. The claimant must be an owner on record of both the original and replacement residences.
Claims must be filed within three years from the date the replacement residence is purchased or newly constructed to receive full relief. Claims filed after the three-year time period will receive Prospective Relief only. Heirs must complete the claim form and meet the exemptions requirement within the first year following the date of transfer.
The exclusion for transfers between grandparents and grandchildren are the same rules as described above except in order to qualify the parents of the grandchild must be deceased. Special rules apply to multi-unit dwellings and mobile homes.”
It’s well worth noting that all 58 California counties now have adopted, in accordance with Proposition 19 stipulations, an ordinance for disaster relief, available to owners of real property, business equipment and fixtures, orchards or other agricultural groves, and to owners of aircraft, boats, and certain manufactured homes. It is not available to property that is not assessable, such as state licensed manufactured homes or household furnishings.