If you own property in California, you may have heard of Proposition 19, which was passed in November 2020 and went into effect on February 16, 2021. But what exactly is Prop 19, and how does it affect you as a property owner? Let's break it down.
Prop 19 primarily deals with two areas: property tax transfers and transfers of property between parents and children. Before Prop 19, if you were over 55, disabled, or a victim of natural disasters, you could transfer the property tax basis of your primary residence to a new home of equal or lesser value within the same county, or to certain counties that accepted these transfers. But under Prop 19, you can now transfer the tax basis of your primary residence to a new home of any value within the state, up to three times. This means that you can take your tax savings with you if you decide to move to a new home, even if it's more expensive.
On the other hand, Prop 19 also changes the rules around the transfer of property between parents and children. Previously, parents could transfer their primary residence and up to $1 million in assessed value of other property to their children without triggering a reassessment of the property taxes. But now, the exemption only applies if the child will use the home as their primary residence, and it's capped at $1 million above the assessed value of the home. This means that if you're planning to transfer property to your children, you'll need to take these new rules into account.
So, what does this mean for you as a property owner? If you're over 55, disabled, or have been affected by natural disasters, you may be able to take advantage of the expanded property tax transfer rules to move to a new home without losing your tax savings. However, if you're planning to transfer property to your children, you'll need to make sure that the property is a primary residence and that you're staying within the $1 million cap.
Overall, Prop 19 is a mixed bag for property owners in California. It provides new opportunities for some property owners to transfer their tax basis to a new home, but it also limits the ability to transfer property to children without triggering a reassessment of the property taxes. If you're thinking of buying or selling property in California, it's important to be aware of the changes that Prop 19 brings and to consult with a real estate professional to make sure that you're making the best decisions for your situation.
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