What is the Role of CPAs in Helping Residents With Prop 19 Establish a Low Property Tax Base

Inheriting Property Taxes in California

Inheriting Property Taxes in California

Inheriting Property Taxes in California From a CPA’s Expert Point of View

Many accountants and property tax consultants these days have reinvented themselves to some degree and have become Proposition 19, 2021 revised property tax relief experts for middle class families and beneficiaries inheriting real property, and for new homeowners in both the middle and upper middle class California income brackets. 

One such noted CA property tax relief expert and CPA, Komal Kabra from Chugh.net, has a lot of interesting things to say, from her focused CPA perspective on property taxes and property tax relief in California.  She tells us:  “Property tax law  protected by Proposition 13 levies property taxes based on a home’s original purchase price, even as the home’s value appreciates over time. Additionally, the law caps property tax at 1% of sale price, with a maximum 2% increase per year.” 

Under  new Proposition 19 property tax regulations, the number of times the tax rate can be transferred to a new home is now three times, versus once under previous tax law… if you are age 55 or older.  Value of the new home compared to the previous home can be any value; and the location of any new home can be anywhere in California. 

Admittedly, this is an excellent improvement offered by Proposition 19, however it is clear that the age issue must be seriously revisited  in the near future, and opened up to embrace younger age groups.  Although it is an interesting turnabout of American age bias, which is typically going the other way around, with bias against folks in the 50 to 60 age group and older. 

CPA Kabra goes on to say:  “Proposition 19, which delivers property tax savings to eligible property owners, including residents who are age 55 or older; Folks that suffer from severe disabilities and people who have lost their house in a wildfire or officially validated natural disaster, such as a dramatic flood or extreme earthquake.” 

Proposition 19 preserves all of these new property tax breaks, while also enabling eligible middle class and upper middle class property owners in California to transfer their lower “base year” property tax rate to a new home of any value, anywhere in the state,  up to three times – affecting homes purchased on or after April 1st of 2021.

Miss Kabra concludes, with a real-world example: “If an eligible homeowner purchases a home of a greater value than their previous home now, under Proposition 19, they will pay a blended tax rate. For example –  let’s take a middle class couple in their 60s, who own  a home worth $600,000 in Los Angeles, which they purchased in 1972 for $200,000.  Let’s say they sell their L.A. home, and purchase a new home for $700,000 in San Diego.  The first $600,000 of the new San Diego home will be taxed based on their original 1972 purchase price of $200,000.  Only the next $100,000 will be taxed based on current or “fair market” value…” 

Saving Money on Property Taxes With Help From the Experts!

There are other challenging property tax issues, as well as critical property tax relief advantages and property tax breaks, for middle class and upper middle class families to address, with which to avoid property tax reassessment, when inheriting property taxes in California…

New property tax relief advantages include the right to transfer parents property taxes and then keep parents property taxes when inheriting property and inheriting property taxes in California, associated with any standard property tax transfer; leading up to and through the parent-child transfer and parent-to-child exclusion (from carrying a “fair market”, or current, property tax burden).  Leading towards Keeping Your Parent’s Low Property Tax Base When Inheriting a Home; or inheriting a new primary residence that requires a transfer of a parent’s low property tax base. 

If done properly with a trust loan from a trust lender a low property tax base can remain in place for decades, when inheriting property taxes in California, saving residential or commercial property owners hundreds of thousands of dollars in the long run.

All the more reason for you to call a property tax consultant or a trust lender experienced in Parent To Child Property Tax Transfer On An Inherited Home as well as the use of irrevocable trust loans and Proposition 19, as well as Proposition 13, to keep your parent’s low property tax base – if you are inheriting a home, or expect to inherit a home at a low property tax rate; and plan to transfer a low property tax base to a new home down the road. 

Or, if you wish to buyout existing co-beneficiaries that are looking to sell their inherited  property shares, while you are set on keeping that same inherited property in the family – plus keeping the same low property tax base your parents enjoyed.  All of these important family issues are well worth careful consideration.

To learn more about your options when inheriting a house from parents – transferring their principle residence’s low property tax base to your new primary residence – call our main line to ask to  speak with a Trust Fund Loan or Property Tax Savings specialist at Property Tax News, the Michael Wyatt Consulting firm, or the Commercial Loan Corp, at (877) 756-4454 

How Has Prop 19 Changed Inheriting California Property and Home Ownership?

How Has Prop 19 Changed Inheriting California Property and Home Ownership?

How Has Prop 19 Changed Inheriting California Property and Home Ownership?

Proposition 19’s supporters would like to reduce Prop 13’s less attractive elements and implement what they would call, “freeing-up long-term homeowners.” 

Prop 19 is expected to generate increased house sales, as well as realtor and broker commissions, which is why Prop 19’s largest supporter, the California Realtors Association spent $40,400,341 to get Prop 19 passed, and the National Association of Realtors kicked in $4,800,000 to promote such a hard-to-sell property tax measure.  The $100,000 donated by the California Professional Firefighters union to Proposition 19 pales in comparison.

Proposition 13, which passed in a landslide way back in 1978, was a unique amendment to the California Constitution which capped residential property taxes on a primary residence to 1970s levels, capping them at 1% of assessed value (plus local additions, by county).  Assessments were allowed to rise at a maximum rate of 2% per year — even though prices on real estate in California continued to increase in most of the state’s 58 counties.

Properties would be reassessed at current market rates when a total change of ownership occurred, either by death, gift, or sale — when the property in question is “transferred”.  What the CA State Board of Equalization calls a “change in ownership.”  Deceptively simple terminology for a rather complex process; made even more complex these days by varying state taxes and Coronavirus issues, verified at property tax relief websites and niche blogs like Property Tax News or Loan To A Trust.

 Inheriting California real estate and home ownership in general is different now as far as property taxes are concerned.  If a homeowner in any county bought a $2,000,000 home today, without any property tax breaks, they might pay roughly $25,000+ per year in property taxes.  A family in a nearby $2,000,000 home that’s been there for let’s say 30 years may owe merely $2,500 per year.  But it’s all relative.  Certain politicians complain about this type of inequity… however  if you bought property 30 years ago, would the same property cost the same last week?  Of course not.  So why should taxes be any different.  

Under Proposition 19, the only low Proposition 13 tax base that can be transferred to your children is that of your principal residence to your heirs (offspring).  Subsequently,  your heirs have to reside in that home also as   their primary residence.  And if that inherited home is valued at more than $1,000,000 it may be partly or completely reassessed by the local  tax  assessor, with a partial or total loss of their Proposition 13 parent-to-child exclusion property tax break.  It is not entirely clear yet how all of this will shake out once the dust settles on this. 

However the entire concept of installing a property tax hike in the midst of a flagging Pandemic economy with growing unemployment and under-employment; or even the decision by the Legislature to  promote a Proposition 19 tax hike in 2021 — to water down middle class homeowners’ ability to avoid property tax reassessment is under a spotlight and being seriously questioned in light of basic survival, and even retirement, by respected economists, academics and analytical websites.   

In most cases, Proposition 19 will effectively eliminate a parent’s right to transfer a low property tax assessment to heirs, since it is unclear at this point how  many heirs or beneficiaries inheriting their parents’ home will be all that excited about  moving into that inherited home as a primary residence — and within 12 months at that. It may be too small for a large family.  Work places may be too far away to be convenient.  School districts could b e a major issue.  And so on. 

Moreover,  many homes are worth far more than $1,000,000 in California. That makes Proposition 19, despite it’s many positive benefits, a liability for many inheritors… with challenging  outcomes for certain taxpaying residents who have inherited California real estate.

The folks who benefit from Proposition 19 are embraced clearly in its’ promotional title: “Home Protection for Seniors, Severely Disabled and Victims of Wildfire or Natural Disasters Act.”  Exactly what the definition and application of  “severely disabled” is, remains to be seen.  As mostly everything with this particular Legislature, it would be safe to say that there are a lot more assumptions in play here than specific, concrete projections that are backed up by well researched data and factual analysis. 

We can assume that homeowners who are over the age of 55, disabled or supposedly “severely” disabled, who have been harmed by a forest fire or  some other natural disaster of some kind,  will be able to transfer the assessed value of their primary California residence to a new home anywhere within the state’s 58 counties. 

This revised property tax relief procedure may be repeated  three times in a lifetime, supposedly, and so homeowners now have two years to transfer their Prop 13 low property tax base.  And one can still expect (with more limitations now built into the process) to be able to take advantage of trust lenders with a loan to a trust if the goal is to buyout co-beneficiaries (i.e., siblings) looking to sell their inherited property shares, as a transfer of property between siblings, with a loan to an irrevocable trust. 

So no matter what, at least for the moment, Californians can still make good use of a property tax transfer from a parent, a Prop 13 low property tax base — under the CA Proposition 13 transfer of property — and transfer parents property taxes, with the sole objective to   keep parents property taxes regardless, when inheriting any kind of property more or less, and inheriting property taxes under California’s parent to child transfer, known as the  parent to child exclusion — which has been the number one target anti property tax relief parties want to  water down, or even repeal.                

Additionally,  if the homeowners’ new house is assessed at a higher value  than their previous home — their property taxes might go up, however not  as high as they would have been before Proposition 19 went into effect. So there is helpful property tax relief here if you look for it, such as being able to establish a Prop 13 low property tax base.  It is just not quite  as simple and straight-forward as it once was, before Proposition 19 more or less replaced Proposition 58 in the sunny state of California, in Nov. of 2021. 

The California Proposition 19 Newspaper Debate

California Proposition 19

California Proposition 19


The official California  “Voter Guide” (Official Voter Information Guide) tells us CA Proposition 19 actually protects Proposition 13 property tax savings; and “closes unfair tax loopholes used by wealthy out-of-state investors” — a subtle reference to East Coast investors, of which in reality there are relatively few families like this actually coming to California to inherit property from parents, under Proposition 13, and rent out to wealthy tourists. 

This exaggerated claim has already been dis-proven, yet folks that support Prop 19  and continuously question property tax relief and Proposition 13, continue to repeat this false claim in the media — even though most CA property owners back Prop 13 and Proposition 58.

Newspapers have weighed in recently on Proposition 19: in terms of support…  

• San Mateo Daily Journal: “This would enable people in high cost areas to move more easily, opening up room for new residents to the area.”

• The San Diego Union-Tribune: “While critics see this as a gift to the wealthy elderly, the great majority of older homeowners are middle-income, not rich. Allowing them (as well as disabled homeowners and wildfire or disaster victims) to downsize without suffering a huge property tax hit is a humane policy that helps people retire with much less financial stress. It would also promote fluidity in home sales, increasing the availability of larger homes for families with children and easing the phenomenon of Proposition 13 depressing the real estate free market by trapping empty-nesters in homes bigger than they need.”

And in opposition…

• Tahoe Daily Tribune: “It’s no secret that ballot initiatives can be confusing, but Proposition 19 takes obfuscation to a whole new level.  Voters can’t be blamed if they can’t remember whether Prop. 19 is the initiative that is a massive property tax hike or the measure that actually has something good for homeowners or the initiative that has something to do with firefighting. The fact is, all three are at least somewhat true — especially the part about the big tax increase.”

• Mercury News & East Bay Times Editorial Boards: “Prop. 19 merely plugs one hole in the state’s porous property tax laws while creating another. It’s time for holistic reform that simplifies the system and makes it more equitable. This isn’t it. The longer a person had owned their current home, and already benefited from inordinately low tax bills due to Prop. 13, the greater the tax break on the new property. And those who downsize would often be competing with first-time buyers for more-affordable smaller homes. The real reform would be to abolish the tax-transfer program, not expand it.”

• The Bakersfield Californian Editorial Board: “Proposition 19 is another do-over on the ballot. Two years ago, the real estate industry spent $13 million on a similar initiative campaign to expand the program statewide and enhance the benefit for eligible homeowners. Sixty percent of voters rejected the initiative.”

• Los Angeles Times Editorial Board: “But Proposition 19 would just expand the inequities in California’s property tax system. It would grossly benefit those who were lucky enough to buy a home years ago and hold onto it as values skyrocketed. It would give them a huge tax break and greater buying power in an already expensive real estate market. It would skew tax breaks further away from people who don’t own a home or who may be struggling to buy one.”

• San Francisco Chronicle Editorial Board: “[Proposition 19] is still a flawed package, designed to rev up home sales that benefit real estate agents who could reap more in commissions. It favors one narrow segment of the tax-paying public but does nothing for the rest of the state’s home buyers. The measure shows the convoluted extremes that California’s tangled property tax system produces.”

Whichever way you see it, it’s fairly clear that Proposition 19 is a billion-dollar tax increase on families. It limits one of the best tools parents have to help their children — the right, enshrined in California’s Constitution since 1986, to pass their home and other property on without any increase in property taxes, as a Proposition 19 parent to child transfer.

On the other hand, Proposition 19 still allows residents to avoid property tax reassessment, as long as families move into inherited property inside 12 months, and only as a primary residence. 

California beneficiaries inheriting property from parents can still work with trust lenders to get a loan to a trust you can also get a trust loan to buyout co-beneficiaries, while locking in a low property tax base… You can still easily buyout co-beneficiaries with a transfer of property between siblings.  Beneficiaries can always take advantage of a property tax transfer — in other words, transfer parents’  property taxes to themselves under Prop 19, what used to be Prop 58… and keep parents property taxes after inheriting property, and inheriting property taxes,  for as long as they live in their inherited home… as a standard Proposition 19 parent to child transfer or parent to child exclusion from current property tax rates. 

Moreover, Prop 19 will in fact generate additional property tax revenue, that will supposedly be put to good use in the state of California. So, it cuts both ways.

Are Trusts Mainly for Wealthy Folks?

Are Trusts Only for the Wealthy

Are Trusts Only for the Wealthy?

Gifting property to adult children is a great thing to do, no matter the tax breaks – and thankfully, if you live in California and inherit property in that state, you do not need to be mega wealthy with $1,200 per hour tax lawyers to be able to avoid property tax reassessment, or to learn how to use a trust to save on taxes or to buy out siblings’ shares in your inherited real estate… with a trust loan.

Putting it bluntly, it doesn’t hurt to live in a state like California, where you get to save tens of thousands in tax breaks every year, compared to other states…. or compared to California the way it was pre-1978 before Proposition 13, and later in 1986 with Proposition 58, when you started to be able to keep parents property taxes when you’ve inherited property and are able to transfer parents property taxes, inheriting property taxes on a property tax transfer with a simple parent to child transfer or as lawyers call it, parent to child exclusion. Or perhaps lucky to be anywhere, if you can keep that house you inherited in your name, and you have a very good accountant! Another point – why trusts aren’t just for wealthy folks to save on income tax. 

There are trust lenders providing trust loans in California to cure family estate problems, with some beneficiaries insisting on selling inherited property – and no one can agree what the property value is, whether the local tax assessor is right or wrong;  or whether to sell or not to sell.  This is most likely one reason, besides saving on property taxes, that many property tax consultants and tax attorneys firmly believe that lawmakers in every state should pass property tax relief bills that make sense.

It would be advisable for homeowners and beneficiaries inheriting property to go to websites focused on CA Proposition 19, Prop 13, Prop 58, and Proposition 60… such as Michael Wyatt Consulting   and Trust and Estate Loans info-sites  or irrevocable trust lenders, or perhaps niche California focused property tax relief blogs like this one, Property Tax News.  Which is simply to straighten up and learn more about why property tax relief is crucial to California, and would be an economic life-saver to other states, if they were to surprise everyone and gain some genuine leadership, along the lines of what New York has.  So the middle class (not just the millionaires) can live in comfort and security.

As every state in America is now in the throes of a relentless pandemic, with a disastrous affect on businesses and unemployment within local and state economies…  lawmakers in every state would be wise to look at passing a property tax relief bill that would give consumers some financial relief, for example as CA Proposition 13 did in beginning in 1978 and Proposition 58 did in the beginning of that Amendment in 1986, giving Californians the ability to transfer parents property taxes.   

It seemed like a miracle for middle class homeowners in California… and beneficiaries to trusts inheriting a home from parents.  Enabling a property tax transfer solution from parents and grandparents when inheriting a home, and likewise inheriting property taxes – with a parent to child transfer or parent to child exclusion… the urgent need to keep parents property taxes was all of a sudden a reality, thanks to Howard Jarvis and colleagues, regardless of their deeper motivations – and of course the ability to transfer parents property taxes when inheriting property; avoiding property tax reassessment to keep property taxes low, and to have the ability to utilize trusts for a lower tax base – for all Americans; not just for corporate CEOs, VIPs and wealthy families in Beverly Hills, in Santa Barbara, the Marina in San Francisco, or similar locales. 

Transferring Your Mom’s Low Property Tax Base Via Prop 19

Transferring A Parents Low Property Tax Base with California Prop 19

Transferring A Parents Low Property Tax Base with California Proposition 19

It’s certainly nice and politically correct of the California Governor to let resident companies and families pay property taxes a few weeks late;   with millions of people unemployed or under-employed — with mouths to feed and bills to pay.  Politically correct, with nice optics… But not terribly effective, let’s face it.

How about just not collecting property taxes as long as the pandemic is literally killing our economy. How about something with a material, profound affect, not just nibbling weakly around the edges.  However, California still has more property tax relief options than any other state in the union, for middle class homeowners.  Wealthy residents  have countless tax cuts and property tax breaks.

At any rate, the country is moving rapidly towards a vaccine. Fine. But if the Governor of California and his team really want to move the needle for middle class residents, and genuinely help working families survive the disastrous pandemic economic effect — why don’t they update and bolster the benefits offered by Proposition 19, which is already in place?  No need to re-invent anything to move this to the next level! 

As the pandemic continues to diminish the California economy — the powerful realtor community and the State Legislature are promoting status quo — not really digging in and trying hard to  upgrade and improve the property tax breaks that are already in place.  They seem to have no appetite at all to make  the lives of millions of middle class homeowners more secure — with hope for better days in the future.  They seem instead to be far more interested in making the realtor community and the Legislature more secure, more comfortable, and a great deal wealthier regardless of the fact that these partisan groups are already swimming in money! 

However, despite the Legislature’s indifference to the financial problems of the middle class, Californians still have property tax relief options such as the right to keep parents property taxes, and transfer parents property taxes upon inheriting property and inheriting property taxes at a low base rate, as per Proposition 58 which is really now Proposition 19… Plus of course Prop 13 — but the walls may close in on us fast if we allow the powers that be to return with anything like the infamous commercial property tax Proposition 15; which would have increased prices across the state on virtually all goods and services… cutting deep into the middle class spending and tax paying machine that basically keeps the state economy alive. 

Many of these middle class residents stay up to date on  their property tax options, with websites such as the official California State Board of Equalization site.  As well as by researching inheritance solutions and property tax relief on property tax blogs like this one, Property Tax News;  plus going to websites addressing Prop 13 and maintaining a low property tax base… basic property tax breaks that allow resident to spend less and save more, like Trust and Estate Loans, and crucial updated information and news on Proposition 19 at the Howard Jarvis Taxpayers Association.  

Residents  these days also look seriously at options  and solutions to property devalued by the affects of the pandemic… going to websites like Michael Wyatt Consulting for help.  In fact, Mr. Wyatt speaks to this on his website in a very direct way.  He says:

The Covid-19 / Coronavirus pandemic has severely impacted the commercial and investment real estate markets in California. This has placed a significant burden on many property owners. The good news is, property tax relief is now available.  One of the property tax relief measures available is for when “restricted access” to properties causes a loss of market value of those properties. The other is reductions in value due to damage, destruction, depreciation, obsolescence, removal of property, or “other factors causing a decline in value“.  An effective method of supporting lost value due to restricted access or damage to a property, is to measure the loss of  revenue  from periods before and after the event causing the decline of the property’s performance.

New homeowners in California also research property tax breaks at  established finance firms that are focused on options that involve Proposition 58, and now Proposition 19, maintaining a low property tax base through a loan to an irrevocable trust, such as critical financing options for California residents furnished by Commercial Loan Corp — again, working hand-in-hand with Proposition 58 having morphed into Proposition 19 for all intensive purposes.   For  all commercial and residential property owners; enabling beneficiaries and homeowners to lock in a secure, low Proposition 13 property tax base, while buying out co-beneficiaries that have inherited the same property, yet are committed to selling their property shares — and who ultimately walk away with far more money in their pocket from irrevocable trust funding, rather than simply accepting cash from a third party buyer!

Property tax options that involve going through a trust loan are important to tax attorneys and sophisticated beneficiaries, as these specific property tax options are always more profitable; as well as maintaining a low property tax base with a property tax transfer, basically for the life of the property, with a standard parent to child transfer, or parent to child exclusion from paying reassessed property taxes; as long as requirements for Proposition 58 — now Proposition 19 — have been met.

We so have effective options to turn to in California… So we shouldn’t complain too much even though new property tax relief changes have created some challenges.  We also have a lot to be thankful for.

If you are curious how much you might be able to save by taking advantage of California Proposition 19 or Proposition 58, fill out the short form located here for a free estimate.