Nancy Williamson, Staff Attorney
Prior to the November 2020 election, we were inundated with commercials about a new tax measure that would bring relief to seniors, the disabled, and victims of wildfires. These were commercials supporting Proposition 19 which was passed by the voters in November 2020. This proposition made sweeping changes to the parent to child property tax transfer laws. Under our previous law, Proposition 58, a parent could transfer an unlimited amount of property tax basis. For example, if a parent purchased a home in 1970, the parent could preserve this low property tax basis by transferring it to his or her children during lifetime or upon death. These transfers were unlimited and applied to any type of real property.
In 2021 this law was changed. The new law, Proposition 19, no longer allows for an unlimited property tax basis from parent to children. Under the new system, any properties which are transferred to children will be reassessed. The law went into effect on February 16, 2021. The purpose of this law is to generate revenue for wildlife relief, fire protection, and emergency response.
However, there is a Primary Residence Exclusion which allows an exclusion from reassessment of $1,000,000 of assessed value in the primary residence if the child claims the home as his or her primary residence. In order to qualify, the parent must have claimed the Homeowner’s Exemption or Disabled Veteran’s exemption prior to the transfer. Additionally, the child must claim either the Homeowner’s Exemption or Disabled Veteran’s exemption within one year of the transfer. This may lead to the avoidance in the reassessment, if the child is living in the home or if the home is worth less than $1,000,000. If both of these factors are not met, there may be a full or partial reassessment upon transfer.
Proposition 19 is a dramatic change from Proposition 58 which was originally passed by the voters in 1986. There has been much outcry over this change and as a result Assembly Bill SB-668 was introduced which would delay the implementation of this law until February 16, 2023. This bill is currently in committee.
If you are a homeowner, there are a few items you may want to review. First, have you claimed your homeowner’s exemption for your primary residence? Claiming your homeowner’s exemption decreases your tax bill by $70 per year, but more importantly, if you pass away and your child inherits your home, he or she may be able to qualify for the Primary Residence Exclusion because you claimed the exemption during your lifetime.
If you have more questions on how this law, you may want to visit the Santa Clara County Assessor’s website. The Assessor has a Proposition 19 Parent Child Estimator you can use to estimate possible reassessments, as well as a video and other resources.
Proposition 19 also changed the ease by which homeowners can transfer their property tax basis to a new county. Under our previous law, you could only transfer your property tax basis to certain counties which recognized these types of transfers. This second part of Proposition 19 went into effect on April 1, 2021, and it allows homeowners who are over 55 years old or disabled to transfer their property tax basis to any other county in the state, up to three times. If an individual is a victim of a wildlife or natural disaster, this property tax transfer is unlimited.
If you are a homeowner and are planning on leaving your residence to your child, you will want to be aware of this issue and start planning. Additionally, if you are planning on moving to another county in California, you will want to fill out the proper documents so you can preserve your property tax basis.