Hello and Welcome to Lori Prizmich and Associates! We are so glad to see that you are interested in learning more about Proposition 19, and how you can benefit from it! Below is some basic information about Proposition 19 to get you started.
What is Proposition 19?On November 3, 2020, California voters approved Proposition 19, the Home Protection for Seniors, Severely Disabled Families, and Victims of Wildfire or Natural Disasters Act. Proposition 19 is a constitutional amendment that limits people who inherit family properties from keeping the low property tax base unless they use the home as their primary residence, but it also allows homeowners who are over 55 years of age, disabled, or victims of a wildfire or natural disaster to transfer the assessed value of their primary home to a newly purchased or newly constructed replacement primary residence up to three times.
The new law will make important changes to two existing statewide property tax saving programs:
- Replace Proposition 58 (1986) and Proposition 193 (1996) by limiting parent-and-child transfer and grandparent-to-grandchild transfer exclusions.
- Replace Proposition 60 (1986) and Proposition 90 (1988) programs for home transfer by seniors and severely disabled persons.
Below is a simplified break-down comparison of how Proposition 19 will affect base year value transfers of persons at least 55 years of age.
BASE YEAR VALUE TRANSFER - PERSONS AT LEAST AGE 55
|Current Law||Proposition 19|
|Type of Property||
|Location of Replacement Home||
|How Many Transfers Allowed?||
Proposition 19 Benefits Homeowners
- Removes location and price restrictions on property tax transfers for homeowners who are 55+, severely disabled, or victims of wildfire or natural disaster and allows them to transfer the property tax base of their existing home to a new home anywhere in California, regardless of price (with an adjustment upward to their tax basis if the replacement property is of greater value).
- Creates housing opportunities to build more senior housing and retirement communities for millions of seniors and Baby Boomers to retire with Prop 19’s tax benefits.
- Generates home-buying opportunities for tens of thousands of renters, young families, and first-time homeowners.
- Provides new revenues annually for fire protection, emergency response, local government, and school districts.
California Homeowners Can Realize Significant Annual Property Tax Savings Prop 19 removes location and price restrictions to allow homeowners who are 55 or older, severely disabled, or victims of wildfires or natural disasters to:
- Purchase a replacement home anywhere in California and transfer the taxable value of their current home, allowing them to realize significant annual property tax savings.
- Move closer to family or medical care, purchase a home that better meets their needs, replace a fire damaged home, or retire or relocate anywhere in the state without a tax increase.
- Save substantially in annual property taxes when moving to a replacement home, even if the replacement home is more expensive than the original primary residence (with an adjustment upward to their tax basis if the replacement property is of greater value).
- Transfer the low property tax base of their original home to a new home up to three times.
Prop 19 Tax Base Transfers Start April 1, 2021
- Replacement home purchases that close escrow on or after April 1, 2021, qualify for Prop 19 property tax base transfers.
- After consulting with their own attorney or tax advisor, clients may also consider transactions where either the sale or purchase of a primary residence takes place before April 1, 2021, as long as the subsequent sale or purchase takes place within two years and on or after April 1, 2021.
- C.A.R. is currently seeking official clarification through implementing legislation. Until the clarification, REALTORS® should encourage their clients to seek the advice of a qualified California real estate attorney or tax advisor if there is a question about a transaction that closes prior to April 1, 2021.
Prop 19 Tax Savings Examples
Buying a Home Across County Lines: If the sale price of the existing home is the same as (or less than) the purchase price of the replacement home, the new taxable value of the replacement home is the same as the original residence.
- Scenario: A senior couple on a fixed income lives in a home valued at $600,000. They paid $2,200 in property taxes in 2020 (based on the $200,000 original purchase price). They want to downsize and move closer to family, but would pay $6,600 in property taxes because they moved across county lines. Under Prop 19, instead of facing a moving tax penalty, the couple would save $4,400 annually in property taxes.
- Under Prop 19: The senior couple can sell their $600,000 home and purchase another home for $600,000* anywhere in California without a property tax increase. When transferring the low property tax base of their original home to another home across county lines, they can move without a tax increase and save $4,400 per year in property taxes.
Buying a More Expensive Home: If the sale price of the replacement home costs more than the price of the existing home, qualified homeowners can blend the tax base of their original home with the tax base of the new home. The new, adjusted property tax base of the replacement home takes the tax base of the original home and adds the difference between the sale price of the new home and the original home.
- Scenario: Another senior couple with a home valued at $600,000 (also paying $2,200 in property taxes) wants to downsize from a two-story home that is too big for their needs, is too expensive to maintain, and has stairs that are difficult for them to use. They want to downsize to a more manageable home in a newly built retirement community nearby for $700,000, but they can’t afford the $7,700 spike in property taxes that comes with moving.
- Under Prop 19: This couple will save $4,400 in annual property taxes*. Prop 19 allows homeowners to keep their existing Prop 13 tax base and transfer it to a more expensive home. The property tax base of the new home is determined by adding the difference between the sales price of the replacement home ($700,000) and the original home ($600,000) to the tax base of the original home ($200,000). In this example, the couple would pay $3,300 in property taxes, instead of $7,700 in property taxes. (*The tax savings could be greater depending on the definition of "equal or lesser" value).
The information contained herein is intended to provide general information and is not intended as a substitute for individual legal advice. Specific examples used are only general examples, and the actual amount of property taxes owed for any person will depend on the specific situation of the individual and a wide variety of other factors. Therefore, all persons are directed to seek the advice of an attorney regarding their specific tax and legal situation.
Additionally, here are some quotes from the actual Proposition 19 legislation.
"SEC. 2.1. (a) Limitation on Property Tax Increases on Primary Residences for Seniors, the Severely Disabled, Wildfire and Natural Disaster Victims, and Families. It is the intent of the Legislature in proposing, and the people in adopting, this section to do both of the following: (1) Limit property tax increases on primary residences by removing unfair location restrictions on homeowners who are severely disabled, victims of wildfires or other natural disasters, or seniors over 55 years of age that need to move closer to family or medical care, downsize, find a home that better fits their needs, or replace a damaged home and limit damage from wildfires on homes through dedicated funding for fire protection and emergency response."