WHAT’S PROPOSITION 19? HOW CAN IT HELP ME?

If You Own a Home in California, There’s Good News.

Did you know that if you are 55 or older, you can transfer your existing property’s tax base to your new residence? Even if you move into a more expensive residence.

 

Proposition 19 builds off California’s existing property tax system, most notably Proposition 13. Prop 13 limits a property’s taxes to 1% of the home’s taxable value, based on the year the house was purchased. It also restricted just how much that taxable value can increase every year, even when the home’s market value increases.

 

The longer they remain in their home, the more benefit a homeowner will receive. Why? Because Proposition 13 ensures that their tax bill remains restricted even while their home’s market value rises. In an area like Santa Barbara, that is especially important.

 

Because so many property owners tend to live in their homes for several years, they’d risk facing a huge surge in property taxes if they ever moved to a new home. Especially at risk would be the very people who couldn’t afford to pay the increase in property taxes: our senior citizens. Proposition 19 was designed to address that very issue these homeowners would face when they sold their homes.

 

Chart provided courtesy of WFG Title

 

Under Proposition 19, not only can homeowners aged 55 and older still capitalize on the opportunity of moving to a home of equal or less value in the same county, while retaining their current tax basis, but with the passage of the revised bill, they now have even greater opportunities.

 

Under this bill, now when you sell your existing home and your new home is more expensive, the difference in the market value between the old and the new home is added to your tax base. You get to carry over your old property tax base, but the additional amount will be reassessed. Even so, this eases tax burdens for seniors who can now blend the taxable value of their old house with the purchase of a new, more expensive home, thus reducing the property tax payment they’d be faced with otherwise. It’s a vital benefit for homeowners who are empty nesters, or anyone needing to move for health reasons.

 

When you can maintain a stable tax basis, you can live a similar life. There’s not enough senior housing to accommodate them otherwise.

 

Jeanne Radsick, California Association of Realtors®.

 

Additionally, you can also take advantage of this and relocate up to 3 times, anywhere in the 58 counties of California (propositions 60 & 90 were limited to 10 counties). In addition, Prop 19 also allows people who are severely disabled or victims of wildfires, to transfer their Prop 13 tax benefits with them.

 

Though disaster-affected homeowners comprise under 1% of those eligible for tax relief under Prop 19, the measure provides them the same benefits as people 55 and older. Proposition 19 also requires the state to apply tax revenues generated from the measure to wildfire response systems. Though in the works, most of the wildfire funding hasn’t started flowing yet.

 

Proposition 19 did away with Propositions 58 & 193. Those most affected under Proposition 19 are the children who would have inherited their parent’s home, and benefit from keeping it as a second home or renting it out. Known as the parent-to-child transfer, Prop 19 eliminates the $ 1 million per parent exclusion. Now heirs who inherit their parents’ properties pay taxes on market value. Prop 19 also eliminates the previous grandparent-to-grandchild transfers.

 

Because these heirs are using their parents’ homes as vacation or investment properties, while some groups feel it’s reasonable to cap the heirs’ tax benefits, others disagree. One of the vocal opponents of Proposition 19 came from the Howard Jarvis Taxpayers Association. While they supported further tax breaks for older homeowners, they don’t support it being funded by raising property taxes on heirs.

 

It’s a billion-dollar tax increase on California families,

 

Susan Shelley, Howard Jarvis Taxpayer Association Spokesperson

 

Chart provided courtesy of WFG Title

 

The exception to this rule is when the property was the parent’s primary residence. In that instance, the child heir must also formally identify that property as his/her new primary residence within one year. Capped at a million dollars, under this scenario there wouldn’t be a re-assessment (Assessed Value + $1,000,000 million = no reassessment). However, the exemption must be filed within one year. Additionally, residential, commercial, industrial rentals, and family vacation homes/cabins are not eligible.

 

While some pre-existing property tax benefits were lost under Proposition 19, there are still many benefits to it that can really help, especially when you’ve owned your home for more than ten years. It’s something to keep in mind if you’re considering moving into a home with less maintenance, you’d like to be closer to your children or grandchildren or you’re ready to move to your favorite community and join your friends.

 

Whatever you decide, you’ll want to talk it over with someone you trust, someone who can help you plan your move. If I can ever help facilitate finding your true north through a real estate change, remember: if you have any questions, I’m only a phone call away.

 

Call me or text me for a confidential, no-obligation consultation. When texting, use the keywords, “real estate inquiry.” I look forward to hearing from you.

 

Because there’s no place like home.

 

The above article is for general informational purposes only. Your situation may not apply. Though deemed reliable, all information in this article is not guaranteed. Please consult the appropriate professional whenever making tax or legal decisions they may have significant consequences that can affect your estate.