Proposition 19, also known as the
Home Protection for Seniors, Severely Disabled, Families and Victims of
Wildfire or Natural Disasters Act, significantly changed how property
taxes are affected when children inherit property in California. Here's a breakdown of
the key changes:
Before
Proposition 19:
- Children
who inherited property from their parents could typically keep the parent's
lower property tax base even
if they didn't use the property as their primary residence. This
benefited children who wanted to rent out the inherited property or use it
for other purposes without facing a significant tax increase.
After
Proposition 19:
- Children
can only keep the parent's lower property tax base if they use the
property as their primary residence within one year of
inheriting it. This
means living in the inherited property themselves as their main home.
- If the child does not
use the property as their primary residence, the property
will be reassessed at its current market value, leading to a
potentially significant
property tax increase.
Additional
important points:
- These
changes only apply to property inherited on or
after April 1, 2021. If a child
inherited property before this date, the
old rules may still apply depending on the specific circumstances.
- There are some exceptions to the new
rules, such
as for children who are already living in the property with their parents
or for properties severely damaged by natural disasters.
Overall
impact:
- Proposition
19 aims to prevent inherited properties from being used for investment
purposes while keeping property taxes low for families who continue to use
them as their homes.
- However, it
can create difficulties for children who inherit property but cannot or do
not want to live in it themselves.
Allows transfers of a family home or family farm between parents and their children without causing a change in
ownership for property tax purposes.
It is an exclusion from change in ownership.
Allows transferee to retain the
taxable value of the transferor. “Taxable value” means the base year value plus inflationary adjustments, commonly
referred to as the factored base year value. (Note: In cases where the transferor died, the date of death is considered
the date of transfer.)
Applies to a purchase or transfer of a family home between parents and their children if the property continues as
the family home of the transferee.
The transferee must live in the home as their primary residence within one year
of transfer and file for the homeowners’ or disabled veterans’ exemption within one year of transfer to qualify for the
exclusion.
•
There is a limit to the value that can be excluded for a family home or each legal parcel of a family farm. The
value limit is equal to the property’s taxable value (factored base year value) at time of transfer plus $1 million. If
the market value exceeds this limit, the difference is added to the taxable value. (Note: The $1 million allowance
will be adjusted annually by the State Board of Equalization (BOE) beginning in 2023.)
It's
important to note that this is a simplified explanation and the specific rules
can be complex.
If you have questions about how Proposition 19 might affect your situation, it's best to consult
with a tax professional or your local county assessor's office.
Philippians 4:13 ,
"I can do all things through him who gives me strength".
