For Californians that are still confused by complex tax breaks, or changes to property tax relief measures such as the right to buyout siblings’ share of inherited property – a high-level summary, boiled down to its’ essential key elements, might help…
Expansion of Property Tax Base Transfers
There have been unexpected limitations to former Proposition 58 tax breaks (now under Proposition 19) such as the parent-child transfer, or parent-to-child exclusion from paying current property tax rates, for beneficiaries inheriting their parents’ home, property tax transfer, the right to transfer parents property taxes and keep parents property taxes, when inheriting property, hence inheriting property taxes, to keep parents property taxes, or the right to buyout siblings’ share of inherited property with a loan to an irrevocable trust in conjunction with Prop 19.
Some limitations now exist where there were none previously, however these benefits are all still intact as genuine property tax relief for beneficiaries inheriting a home from parents, or homeowners transferring a low property tax base from an old home to a new replacement home.
Surprisingly progressive property tax relief measures provided by Proposition 19 allow homeowners who are over 55 years of age, or disabled, or victims of a wildfire or natural disasters such as an earthquake or flood… to transfer the lower assessed property value of their original primary home – to a recently purchased or recently built primary replacement residence. Up to three times (or once per disaster).
And, increased from the previous property tax measure which limited portability only to certain approved counties, ones’ tax base may be transferred to a property located anywhere in the state. Besides being able to transfer the taxable value of their existing primary residence to a new replacement primary residence of any value, anywhere across all 58 counties in the state of California. The exclusion can be filed up to three times by property owners over age 55, or severely disabled.
However. The opportunity to use a natural disaster such as an earthquake or flood, or wildfire, for the same tax break turns out to be a rather dubious benefit for eligible homeowners. Because it’s highly unlikely that one family or single homeowner will be hit by a natural disaster or wildfire more than once, even though severe damage from a forest fire or wildfire could very easily occur, residing in Southern California.
Although, when getting on in years, or being disabled, knowing you can transfer your low property tax base three times is a nice benefit to have in your back pocket, knowing you can use it if you need to. It’s just not a terribly realistic tax break, that’s all.
Prop 19 dramatically changed two property tax measures, administered by County Tax Assessors for years:
a) Parent-Child Transfers & Grandparent-Grandchild Property Transfers, effective February 16, 2021;
b) Senior Citizen and Disaster Relief Tax Base Property Transfers, effective April 1, 2021.
Parent/Child Transfers & Grandparent/Grandchild Transfers
Under Proposition 19, to inherit a lower property assessment from parent(s) or grandparent(s), these requirements have to be completed:
a) An inherited Property must be the primary residence of parents or grandparents
b) Inherited property must become the primary residence of the child or grandchild heir inside 12-months
c) Only the principal residence of a parent(s) or grandparent(s) qualifies for a base year value transfer. Other property, residential or commercial no longer qualify for this benefit. This provision applies to transfers starting Feb. 16, 2021
Parent-child transfer & grandparent-grandchild transfer forms
Property Transfer Tax Assessments
Proposition 19 expanded and revised rules for tax assessment transfers in California. Eligible homeowners used to be able to transfer their tax assessments to a different home of the same or lesser market value, which allowed them to move without paying higher taxes.
Homeowners who were eligible for tax assessment transfers are persons over 55 years old, persons with severe disabilities, and victims of natural disasters and hazardous waste contamination. Any homeowner of any age can buyout siblings’ share of inherited property through a trust loan, in conjunction with Proposition19, in California.
New property tax measures allow eligible homeowners to transfer their tax assessments to a home anywhere in the state and allow tax assessments to be transferred to a more expensive home bearing in mind an upward adjustment. The number of times that a tax assessment can be transferred increased from one to three times for homeowners age 55 and over, or with severe disabilities.
These new tax breaks will impact farms as of Feb 16, 2023, the $1,000,000 amount will be adjusted each year at a rate equal to the change in the California House Price Index.
CA Property Tax Revenue
Proposition 19 introduced the California Fire Response Fund and County Revenue Protection Fund. The CA Director of Finance has to add up extra revenue and savings from the new property tax law. The State Controller has to fund the Fire Response Fund with 75% of the determined revenue, with 15% going to the County Revenue Protection Fund.
The County Revenue Protection Fund is supposedly going to be used to reimburse counties for losses in revenue associated with changes to property taxes. The Fire Response Fund is to be used for full-time fire station staff.
Property Tax Base Transfers for Homeowners Over 55
One other component under Proposition 19 allows homeowners who are over 55 years of age, disabled, or victims of a wildfire or natural disaster, to transfer the lower assessed property value of their primary home to a newly purchased or newly constructed replacement principal residence up to three times (or once per disaster). The tax base may be transferred to a property located anywhere in the state.