Proposition 19: Property Tax Exemptions from Reassessment
New Rules on Tax Basis Portability With the passage of Proposition 19, a homeowner who is over 55 years of age, severely disabled or whose home has been substantially damaged by wildfire or natural disaster may transfer the taxable value of their primary residence to:
• A replacement primary residence
• Anywhere in the state
• Regardless of the value of the replacement primary residence (with adjustments if "greater" in value)
• Within two years of the sale
• Up to three times (but without limitation for those whose houses were destroyed by fire)
Proposition 19 will supersede the old rules which limited this exemption to the sale and purchase of a principal residence within the same county (Proposition 60) or between certain counties (Proposition 90) -- but only if the replacement property was of "equal or lesser value" and only one time.
Purchases and Sales Before April 1, 2021
Although we believe that the tax benefits under Proposition 19 apply to 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, others have taken the position that both the sale and purchase must occur on or after April 1st, 2021. C.A.R. will seek official clarification of this issue. As always, our advice to agents is to not give legal or tax advice -- especially on an issue that is so consequential and presently has no definitive answer. If an agent has a client who wishes to obtain the tax benefits of Proposition 19 for a transaction that closes prior to April 1, 2021, whether it is buying or selling a property, the client should be encouraged to seek the advice of a qualified California real estate attorney or tax advisor. Nonetheless, owners of real property that qualify under Proposition 60 or 90 can still take advantage of those features until April 1, 2021. (If an owner never took advantage of these and were qualified, they might be able to get a refund of taxes already paid.
Family Transfers and Family Farms
Proposition 19 also changes the rules on exemptions from reassessment for intergenerational transfers by limiting the exemption to the transfer of a primary residence to a child (or grandchild) only when the property continues to be used as a family home by the child (or grandchild), and even then, if the divergence between the taxable value and the actual value is too great, a partial increase in the new taxable value will be imposed. Proposition 19 also includes provisions that would allow the transfer of a family farm to retain its taxable value. These new rules apply to any purchase or transfer beginning February 16, 2021.