What Does Proposition 19 Mean for California Sellers?
Passing Prop 19 in November 2020 will have significant consequences for homeowners selling in one county and buying in another. We witnessed much of this movement in the past few months as families in the bigger cities – such as San Francisco – wanting more space and bigger homes, moved to the suburbs. As a result of Prop.19 there will be consequences going forward that may benefit sellers who moved between counties rather than within a county.
Up until February 15, 2021 a seller could only transfer their tax base within certain counties. With this new law enactment, eligible homeowners may now transfer their tax basis anywhere within the State.
Additionally, Prop.19 increases the number of times that certain people may transfer their tax assessments. If a person is 55 years or older, has severe disabilities, or lost a home in a natural disaster (such as a fire), the person may transfer their tax assessment up to three times (formerly only once.).
Unfortunately, many people will experience a negative impact from Prop.19 since it considerably limits the parent-child exclusion for purposes of real estate tax assessments. Formerly, parents could transfer a primary residence to children without any new fair-market reassessment regardless of how they might use the property, thus allowing them to enjoy the same property tax basis as their parents.
In the past, if a child chooses to keep the home and to use as a primary residence, a $1 million of reassessed value will be excluded from the new property tax basis. If, however, the child decides to keep it as a rental property or anything other than the primary residence, there is no $1 million exclusion, and the child will face a significant increase in property taxes.
It would seem that this Proposition will have as much of an impact on California real estate as Prop.13.
The content of this blog contains general advice only and does not consider individual financial circumstances, desired loan amounts or existing real estate or lending transactions. This information is intended for licensed Real Estate Agents and licensed Lenders/Mortgage Brokers and is posted on our company website and specific blog sites with the express purpose of reaching such licensed individuals.