Proposition 19 was passed in November 2020 and made significant changes to existing rules on intergenerational transfers (property from parent-child or grandparent-grandchild) and tax portability. Prop 19 replaces and modifies existing propositions like Prop 58, Prop 193, Prop 60, Prop 90, Prop 50, and Prop 171. With all of these changes, there is some confusion to when Prop 19 is in effect and how the different provisions will be executed.
There are two important dates in regards to when Proposition 19 takes effect.
The rules on Intergenerational Transfers are effective February 15, 2021.*
The rules on Tax Base Transfers are effective on April 1, 2021.
Proposition 19 has 2 key components: intergenerational transfers and tax portability.
*Because February 15, 2021 is a federal holiday, the effective date will be the next business day February 16, 2021.
Summary of Proposition 19
Below is information from the Los Angeles County Office of the Assessor:
Proposition 19, or the Home Protection for Seniors, Severely Disabled, Families and Victims of Wildfire or Natural Disasters Act, is a Constitutional Amendment that imposes new limits on property tax benefits for inherited family property. Under Proposition 19, a child or children may keep the lower property tax base of the parent(s) ONLY if the property is the principal residence of the parent(s) and the child or children make it their principal residence within one year.
Transfer of Property Tax Base
The other component of Proposition 19 allows homeowners who are over 55 years of age, disabled, or victims of a wildfire or natural disaster, to transfer their lower assessed property value of their primary home to a newly purchased or newly constructed replacement principal residence up to three times (or once per disaster). The tax base may be transferred to a property located anywhere in the state.
Proposition 19 – Intergenerational Transfers
Before Prop 19 was passed, in certain cases property could be transferred without triggering reassessment. Proposition 19 now gives a series of conditions that must be met in order for the reassessment to not occur:
Under Proposition 19, in order to inherit the lower property assessment of the parent(s) or grandparent(s), the following conditions must be met:
1) The property must be the principal residence of the parent(s) or grandparent(s)
2) The property must become the principal residence of the child or grandchild within one year
3) Only the principal residence of a parent(s) or grandparent(s) qualifies for a base year value transfer. Other property, residential or commercial no longer qualify for this benefit
This provision applies to transfers starting Feb. 16, 2021 (since Feb. 15 is a holiday).”
Proposition 19 – Tax Portability
According to the Los Angeles County of the Assessor’s office, California State Board of Equalization:
“Proposition 19 allows homeowners who are over 55 years of age, disabled, or victims of a wildfire or natural disaster, to transfer their lower assessed property value of their primary home to a newly purchased or newly constructed replacement principal residence up to three times (or once per disaster). The tax base may be transferred to a property located anywhere in the state.”
This tax portability feature means that a homeowner can sell, relocate, and bring their tax base with them. Many homeowners choose not to sell because they are worried about their property tax changing. For homeowners who are seniors, disabled, or affected by wildfires or natural disasters, this is a great way to be able to sell and move to another property.
There is not clear guidance on whether the April 2021 effective date means you can sell your current home before April 2021 and purchase after 2021, but the state is providing more detailed information as the legislation and language is cleaned up.
The State Board of Equalization website answers questions like whether you have to be all three: (1) senior (2) disabled and/or (3) a victim of a natural disaster. The answer is you can be any of them.
How Can You Use Prop 19
The next question you may have is: “How do I use the tax portability part of Prop 19? Do I automatically get to transfer my tax base year?”
According to the California State Board of Equalization when Proposition 60 and 90 were in effect:
This means that if you sold in Los Angeles County and purchased in San Diego County, then you could obtain your BOE-60-AH form from the San Diego County Assessor’s office and file it there. The State Board of Equalization website does not have a claim form on their website as of January 2021, but as the effective date of April 2021 comes closer, then the claim form should be available.
After the original property is sold and the replacement property is purchased and occupied as a principal residence, an application must be filed with the county assessor where the replacement property is located. The claim form, BOE-60-AH, Claim of Person(s) at Least 55 Years of Age for Transfer of Base Year Value to Replacement Dwelling, must be obtained from your assessor’s office which may offer a downloadable form from their website
California State Board of Equalization Website
Los Angeles County Office of the Assessor
This material is provided for informational purposes only. Please consult the appropriate legal, tax, accounting, estate planning, or other professional for advice. KALEO Real Estate Company does not intend to advise on tax, legal, accounting, or other decisions.