California Proposition 19, a constitutional amendment for property tax transfers and exemptions, was approved by voters during the November 2020 election and took effect on February 16, 2021. This is the most dramatic change to property tax protections since Proposition 13 was passed in 1978. Property owners need to understand the property tax consequences of Proposition 19 and how it will impact families across California.
Proposition 19 primarily concerns two groups of California property owners. Proposition 19 provides a property tax break for homeowners age 55 or older, disabled persons, or victims of wildfire or natural disaster. These persons may transfer their primary residence’s taxable value to a replacement residence of equal or lesser value, if they relocate anywhere within California.
If the replacement primary residence is worth more than the original residence, the taxable value of the replacement property is increased by the difference between the full cash value of the new primary residence and the original primary residence. The ability to transfer the taxable value of a primary residence may be utilized up to three times.
This generous tax break for gifted or inherited real property is severely limited under Proposition 19. Prop 19 requires the child who receives a primary residence to use the home as his or her primary residence within one year of receiving it, in order to claim the reassessment exemption. The new owner must claim the homeowner’s exemption (or the disabled veteran’s homeowner exemption) within one year of the transfer.
Transferred homes that are not used as principal residences will be reassessed at fair market value for purposes of calculating annual property tax.
You are encouraged to consult with the estate planner, or other experts before implementing a plan to be based on each client’s estate planning goals and to make best use of the available property tax, plus gift and estate tax opportunities.
This is a portion of an article by BY JUDITH Y. TANG ON FEBRUARY 17, 2025 AT: https://www.mondaq.com/unitedstates/real-estate/1586860/california-proposition-19s-impact-on-estate-planning-and-gifting-of-real-property