California’s Proposition 19, passed in 2020, introduced significant changes to property tax rules, particularly regarding tax basis transfers.

One of the most notable benefits is that it allows eligible homeowners—primarily seniors, disabled individuals, and victims of natural disasters—to transfer their Primary Residence property tax basis to a new Primary Residence. This provision helps homeowners maintain financial stability, encourages housing turnover, and provides relief to those affected by hardships.

Under previous laws, homeowners who wanted to move to a new home often faced a major financial barrier: a sharp increase in property taxes. Proposition 19 addresses this by allowing eligible homeowners to transfer their existing Primary Residence property tax basis to a new Primary Residence anywhere in California. This is particularly beneficial for retirees looking to downsize or move closer to family without worrying about a substantial tax hike.

Before Prop 19, property tax basis transfers were limited to certain counties, making it difficult for homeowners to move freely within the state. Now, eligible homeowners can relocate anywhere in California while keeping their lower tax assessment. This opens up more choices, whether someone wants to move to a more affordable area, a home better suited to their needs, or be closer to medical facilities and family.

Additionally, the new law allows homeowners to transfer their Primary Residence tax basis up to three times, whereas before, they could only do it once. This change provides even greater flexibility, ensuring that homeowners are not locked into one decision for the rest of their lives.

Another major benefit of Prop 19 is that it helps address California’s housing shortage by encouraging housing turnover.

Many long-time homeowners, especially seniors, have been reluctant to sell because they feared losing their low property tax rate. By allowing them to keep their tax basis, Prop 19 reduces this financial disincentive, leading to more homes being put on the market.

As a result, younger families and first-time homebuyers have better opportunities to find housing, which can help ease California’s tight housing market. The increased turnover can also stimulate the real estate market, benefiting both buyers and sellers.

Relief for victims of natural disasters

Prop 19 also provides relief for victims of natural disasters, a critical issue in a state frequently affected by wildfires, earthquakes, and other calamities.

Under the new law, homeowners who lose their Primary Residence due to a disaster can transfer their original property tax basis to a new Primary Residence, helping them recover financially. Without this provision, disaster victims would not only have to deal with the emotional and financial toll of losing their home but also the added burden of higher property taxes when purchasing a replacement Primary Residence. This change ensures they can rebuild their lives without unnecessary financial strain.

One important caveat to be aware of is that under previous laws, children who inherited a parents or grandparents Primary Residence could keep the original tax basis even if they used the home as a rental or investment property. Now, the tax break applies only if the heir uses the property as their primary residence.

Proposition 19’s tax basis transfer provision offers significant benefits to eligible California homeowners. It provides financial relief, increases flexibility in housing choices, encourages turnover in the real estate market, and supports disaster victims

For seniors, disabled individuals, and disaster victims, Prop 19 represents a crucial opportunity to move without financial penalty based on the current rules that apply for a primary residence transfer. For the broader housing market, it encourages mobility and makes homeownership more accessible to younger generations.

Ultimately, the measure helps create a more dynamic and equitable housing landscape in California.

If you are considering buying or selling a home in California and would like guidance on how to take advantage of Prop 19’s Tax Basis Transfer options, please contact:

Maureen Tess-Fieberg and Antoinette Embry

Realtors

Compass Mission Hills

(619) 800-1103

[email protected]

DRE# 01217712 and DRE# 01305747

*Information is being offered as educational advice, please consult your tax professional or attorney for specific circumstances and laws.

Photo credit: Pixabay.com