Changes to California Property Tax Relief in 2021
The Home Protection for Seniors, Severely Disabled, Families, and Victims of Wildfire or Natural Disasters Act (AKA: Prop 19)
For homeowners in California , it’s important to have a good general understanding of how property tax relief is changing. Fortunately, Californians finally do have a clearer understanding of what property tax measure Proposition 19, passed into law on Nov 3, 2020 by voters in the state of California, is really all about, as well as how Proposition 58 has changed, in terms of property tax reassessment.
A lot of property owners in California aren’t aware of the fact that Proposition 19 was also entitled, “The Home Protection for Seniors, Severely Disabled, Families, and Victims of Wildfire or Natural Disasters Act” – A peculiar, overly wordy title; indicating that seniors, severely disabled people and victims of wildfires or natural disasters will be able to transfer the taxable value of their “original residence” to a “replacement residence” up to three times during their lifetime – anywhere throughout all 58 counties within the state of California.
California State Board of Equalization Chairman Antonio Vazquez said, in regards to the new tax measure, Proposition 19: “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.”
What is the California State Board of Equalization (BOE)?
For all of us who have heard all about BOE for many years, yet have not really understood what the California State Board of Equalization was really all about – it would be a good idea to sit down for a moment and look more closely at the BOE, and see what it is that they do, and how they break down the new Proposition 19 tax measure.
For starters, the CA State Board of Equalization is literally the only elected tax board in the United States. It contains four Equalization District Members, positioned by locale, plus the State Controller. BOE’s legal responsibilities encompass the management of 58 County Assessors to make sure assessment best practices are in order statewide, without deviating from the set rules and regulations.
Believe it or not, the State Board of Equalization also assesses the property of public utilities along with regulated railroads, and takes in revenue from private railroad car tax. BOE also manages “Alcoholic Beverage Tax” and “Tax on Insurers”; plus property tax administration, promoting “fair and equitable assessments” – protecting tax revenue that school systems, local communities, and the California Legislature depend on, year after year.
Dispelling Confusion Around Proposition 19
The BOE also clarifies some of the confusion surrounding Proposition 19 and its’ ability to help residents avoid property reassessment, in contrast to Proposition 58; confirming that middle class seniors, age 55 and older… often living on a modest fixed income; or those severely disabled, must meet specific requirements to qualify for new property tax breaks.
Both an “original” and “replacement residence” has to meet special requirements in order to be eligible for the homeowners’ or disabled veterans’ exemption. An application has to be completed and filed with the County Assessor to enable transfer of any taxable value. Finally, a “replacement residence” must be purchased or newly constructed within two years of the sale of an original home. If the market value of a “replacement residence” is greater than the market value of the “original residence”, the difference will be added to the taxable value when transferred.
As far as victims of a wildfire or natural disaster are concerned, similar requirements apply but there are no age restrictions. In order to qualify, a residence has to be seriously damage by a wildfire or a legally verified (frequently “governor verified”) natural disaster.
Parent-Child Exclusion, Originally Under CA Proposition 58
It is true that CA Proposition 19 limits property tax relief under CA Proposition 58, most notably the parent-child exclusion. This eliminates the $1,000,000 assessed value reassessment exclusion as in a parent-child transfer of residential property that is not a primary residence. This obviously limits the parent-child transfer exclusion from property tax reassessment to primary residences only.
Yet as long as that criteria is met, Californians can avoid property reassessment, keeping a low property tax base when inheriting a home; as long as the parent leaving the property resided there as a principle residence as well, plus beneficiaries inheriting the property make sure they move in within that 12-month deadline, the California parent to child exclusion from property tax reassessment is protected by Proposition 19, formerly by Prop 58. As long as this type of property tax transfer, Prop 19 property tax break, is used properly, and the move into an inherited home occurs within one year of inheriting property taxes from a parent. To reiterate, taken over by the beneficiary, or heirs, as a primary residence; in order to avoid property reassessment. And according to the new tax laws, as of Feb 2021, this is the only method left to residents, after Proposition 19 limits are imposed, to be able to successfully transfer parents property taxes – and keep parents property taxes, basically forever.
Transfer of Assessed Value to a New Residence
To review, the other major changes to property tax relief for California property owners, as we touched on a moment ago, is relief for homeowners age 55 and older, folks with a disability, or victims of a wildfire or natural disaster. These residents are now able to transfer assessed value of their primary residence in any county in California – to a home they have just bought, or a newly constructed “replacement residence” used as a primary home.
These new Proposition 19 measures apply to real estate anywhere in California, if you are a resident of the state or not. Which is a positive change – plus, certain property tax breaks used be accessible only in certain counties. Californians with vacation homes, residential homes that are for rent, or commercial properties (owned outside any corporations, partnerships, limited liability companies, etc.) may not be able to avoid property reassessment, and may have to face property tax reassessment burdens, and may want to seek legal counsel or help from a trust lender or property tax specialist or consultant.