With the passage of Proposition 19, California property tax changes are taking effect in the upcoming year. While the best way to understand tax laws is to speak with a certified tax professional, here is an overview of the changes ahead.
What Property Tax Rules Does Prop 19 Change?
In November of 2020, California voters approved Proposition 19. The proposition changes tax rules that have existed since Proposition 13 passed in 1978 and Proposition 58 passed in 1986.
Proposition 13 limited property tax increases to 2% annually unless the property was reassessed for a sale or other transfer. As a result, many California properties have a property tax assessment significantly lower than fair market value.
Proposition 58 allowed a property owner to pass along their primary residence (and up to $1 million in assessed valuation of other property) to their children (and grandchildren) at their preferential property tax assessment.
Who is Impacted by Prop 19?
Homeowners who are over 55, disabled or wildfire/disaster victims
Prop 19 allows homeowners over 55, disabled homeowners, or wildfire/disaster victims to take a portion of their property tax base with them when they sell their current home and purchase a new home of lesser value.
Residents who inherit property
Prop 19 also sets limits on the ability of heirs to keep low property tax payments on inherited property. Currently, heirs who inherit residential property maintain their relatives’ property tax rate. Under the new rules, these heirs will now pay market value in property taxes. However, inherited properties used as primary homes would be eligible for property tax savings.
Key Dates
February 15, 2021
Proposition 19 is effective for transfers after February 15, 2021.
April 1, 2021
Date for changes to transferring a primary residence’s tax base.
More Info About Property Tax Changes
Click below for a summary of Proposition 19 from the State Board of Equalization.
Talk to a Tax Professional or Estate Planner
Again, the best way to understand how these new rules will impact your property taxes is to speak with a certified tax professional or an estate planner. They can guide you through these new rules and help you plan ahead and make any changes to your estate plans.
