By a razor-thin majority of 51.1 percent, California residents passed the state’s Proposition 19 in November. Replacing Prop. 13, enacted in 1978, significant changes in residential property taxes will go into effect on April 1.
As with any successful proposition referendum, the passage of Prop 19 comes with positives and negatives, depending on home values, the timing of sales, and other real estate-related matters.
For Californians 55 and older, severely disabled, or wildfire/natural disaster victims, the news is good as they will benefit from the initiative. For those selling their homes, property tax bases of the new residences will be assessed at the original purchase price of the previously sold house, not the value of the new dwelling at the time of the sale.
Simply put, they will have the same tax base they enjoyed on the day they purchased their previous home and can transfer up to two more times when moving within California.
The downside involves the significant changes, if not outright limits involving property transfers from parents to children. Pre-Prop 19 allowed for waiving reassessments of a home’s value. Following February 15th, that exemption takes a much different form. Parents must be using the residence as their principal home, and the offspring receiving/moving into the property must do the same. Limits exist with the ceiling at the assessed value plus $1 million when the transfer occurs.
Family farm owners can also benefit from the new rules.
For now, time is on the side of California property owners to take action before Prop 19 becomes the law of the literal land.