Proposition 19 Property Taxes

There seems to still be a great deal of confusion in California regarding Proposition 19 benefits and homeowners over age 55, property owners who are severely disabled, and residential or commercial property owners who have been impacted physically and/or financially by a California wildfire or natural disaster such as a flood or earthquake.

Thanks to Proposition 19, also entitled “The Home Protection for Seniors, Severely Disabled, Families, and Victims of Wildfire or Natural Disasters Act”, approved by California voters Nov 3, 2020, these residents can now transfer the taxable value of their initial primary residence to a replacement principle residence as many as two or three times prior to their death; in any of the 58 counties in California. Therefore, to clear up some of this confusion and misinformation, we’ll delve into some these benefits here.

Commenting on these new California Proposition 19 benefits,  specifically for seniors and other property owners impacted by disabilities and natural disasters, California State Board of Equalization (BOE) Chairman Antonio Vazquez commented in his usual articulate fashion: “Seniors, the severely disabled, and victims of wildfires or natural disasters can now move to a replacement home anywhere in California and avoid significant property tax increases if eligible… Property tax relief can be beneficial for those especially on limited incomes or who have been affected by wildfires or natural disasters.”

Seniors, age 55, and others who qualify have to verify that both the original property and the “replacement residence” they are moving into are both eligible for the Disabled Veterans’ Exemption and the Homeowners’ Exemption. The BOE tells us quite specifically, concerning both the homeowners’ exemption and the disabled veterans’ exemption:

“The Disabled Veterans’ Exemption reduces the property tax liability on the principal place of residence of qualified veterans who, due to a service-connected injury or disease, have been rated 100% disabled or are being compensated at the 100% rate due to ‘unemployability’. An unmarried surviving spouse of a qualified veteran may also claim the exemption.

As for the Homeowners Exemption: The California Constitution provides a $7,000 reduction in the taxable value for a qualifying owner-occupied home. The home must have been the principal place of residence of the owner on the lien date, January 1st. To claim the exemption, the homeowner must make a one-time filing with the county assessor where the property is located. The claim form, BOE-266, Claim for Homeowners’ Property Tax Exemption, is available from the county assessor.

A person filing for the first time on a property may file anytime after the property or claimant becomes eligible, but no later than February 15 to receive the full exemption for that year. Homeowners’ Exemption claimants are responsible for notifying the assessor when they are no longer eligible for the exemption. December 10th is the last day to terminate the Homeowners’ Exemption without penalty; the assessor should receive notice of ineligibility by that date.”

An application has to be filed with a County Assessor in order to transfer any taxable value. Moreover, the so-called ‘replacement residence’ has to be purchased or constructed as a new property inside of 24-months from the sale of the original primary residence. However, should the fair market value of the replacement residence be larger than the sales value of the original residence, the difference in dollars must be added to the “taxable value” when the property tax transfer occurs. We realize this is still a bit confusing, however your trust lender or attorney will fill in any gaps to clarify how this works.

As for victims of a California wildfire, of which there have been many… or a so-called “natural disaster” such as an earthquake or flood, for example, the same requirements apply as the taxable value for the transfer for seniors, just without the age requirements. The primary residence damaged by a wildfire or state government-verified “natural disaster” in will need to be fairly damaged, obviously, in order to qualify for these new Prop 19 exemptions.