Understanding Prop 19
By Kurt Real Estate Feb 19, 2021
As you may now know, CA voters passed Prop 19 making some important changes to certain property tax exemptions. If you’re considering selling your home or an inner-family transfer, it’s important you know what these changes are, when they go into effect, and how they may affect you.
Effective as of Tuesday, February 16, 2021, the following qualifications now apply to inherited properties:
Ends Special Rules for Properties Not Used as a Home or for Farming. The special rules would apply only to two kinds of inherited property. First, the rules would apply to properties used as a primary residence by the child or grandchild. Second the rules would apply to farms. Properties used for other purposes could no longer use the special
Requires Tax Bill to Go Up for High Value Inherited Homes and Farms. The property tax bill for an inherited home or farm would go up if the price the property could be sold for exceeds the property’s taxable value by more than $1 million (adjusted for inflation every two years). In this case, the tax bill would go up but not as much as it would if the property were sold to someone else.
Effective beginning April 1, 2021, the following expanded special rules will apply for eligible homeowners:
Allows Moves Anywhere in the State. Eligible homeowners could keep their lower property tax bill when moving to another home anywhere in the state.
Allows the Purchase of a More Expensive Home. Eligible homeowners could use the special rules to move to a more expensive home. Their property tax bill would still go up but not by as much as it would be for other homebuyers.
Increases Number of Times a Homeowner Can Use the Special Rules. Homeowners who are over 55 or severely disabled could use the special rules three times in their lifetime.
Last, but not least, Prop 19 allocates net state (but not local) revenues and savings (if any) to wildfire response and for reimbursing local governments.
However the COVID-19 Pandemic has created significant uncertainty for the state budget, the legislative analyst believes that the vast majority of the wildfire funding will not start flowing until 2025 at the earliest.
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