03/05/2021
PROPOSITION 19 - THE NEW PROPERTY TAX BREAK!
PRO'S & CON'S
LAST NOVEMBER 2020 CALIFORNIANS AT THE BALLOT BOX APPROVED PROP. 19 WHICH IS A NEW PROPERTY TAX BREAK
AFFECTING A GROUP OF PEOPLE AND THAT GROUP OF PEOPLE
COULD BE YOU?
HERE ARE SOME HIGHLIGHTS OF THIS NEW TAX BILL
First off, who can take advantage of the new tax benefits from Prop 19?
All Californians who:
@ Are over 55 years of age.
@ Are severely disabled.
@ Own a home that has been substantially damaged due to wildfire
or natural disaster.
For people in these groups, Prop 19 made three significant changes to the way property taxes are calculated when they sell a principle residence and move into a new primary residence.
What are these Changes?
Sellers in these groups can now transfer the tax basis of their property ANYWHERE in the State of California. YES I SAID ANYWHERE!!! Previously, inter-county transfers were done on a limited basis, In fact I only helped one property tax transfer for one of my clients in 44 yrs as a realtor. I'm a realtor that will have to die with his boots on because I have a 15 yr old daughter to raise. But I expect this new tax law to change things for the better.
Sellers in these groups can now transfer the tax basis of their Sold property to their replacement property regardless of value. Previously, transfers had to be done only to properties of equal or lesser value. Note. Some adjustments will be made if the property is of greater value but the change is reasonable. More to come on this subject!
Sellers in these groups I outlined may take advantage of this benefit up to THREE times - and victims of wildfires and other natural disasters have NO LIMITATIONS. Previously, sellers could only make use of this transfer one time.
Who qualifies as " severely disabled"?
Per the California Revenue and Tax Code Sec. 74.3, any person who has a physical disability or ailment, whether from birth or by reason of and accident or disease, that results in a functional limitation as to employment or other activities can likely qualify as " severely disabled".
When do these tax transfer benefits go into effect?
Beginning on April 1, 2021
So, what if I qualify and want to sell my home now, Do I need to wait until April 1, 2021, to purchase another home?
The jury is still out but my understanding is as long as either the sale of and existing home or the purchase of a new one occurs after April 1, 2021, the transaction will be eligible for Prop. 19 benefits - as long as both transactions were completed within two years of each other. As I mentioned the jury is out and this question still needs to be legally resolved.
Can I purchase a replacement property before selling my primary residence?
Yes
Prop. 19 also takes away some tax benefits for intergenerational family transfers. How does this work?
Under Prop 19, the only time and intergenerational property transfer is not subject to a tax reassessment is when a primary residence is transferred to a child or grandchild, and that person continues to use the residence as a family home. Even then, if the difference between taxable value and actual value is more than 1 million, some upward adjustment on the taxable value will be imposed.
So if a child inherits a family property but chooses not to us that property as their primary residence, the property's tax basis will be reassessed?
Correct
So. when do the intergenerational family transfer rules kick in?
They started February 16, 2021.
Note: Because this situation is unique and untested I encourage all homeowners to consult with their own tax attorney or accountant regarding any and all questions regarding the legality of the New Proposition 19.
